New York Fed economists confirm that Americans are the ones footing the bill for 90% of Trump’s tariffs

A New York Fed analysis using U.S. Census trade data through November 2025 finds U.S. firms and consumers bore nearly 90% of 2025 tariffs (94% Jan–Aug, 92% Sep–Oct, 86% Nov) as average tariff rates rose from 2.6% to 13% over the year. Other sources cited add the levies raised CPI by about 0.76% through October 2025 and show foreign exporters absorbed only a small share, while companies like Procter & Gamble raised prices and General Motors reported a $1.1 billion hit; consumer confidence fell to an 11-year low. Political and legal pressure is mounting — the House moved to overturn Canada tariffs and the Supreme Court will rule on tariff legality — complicating outlooks for consumer-facing sectors, corporate margins, and fiscal projections that the administration has tied to tariff revenue.

Analysis

Market structure: Large, import‑dependent consumer and auto OEMs are clear losers — tariffs quintupled to ~13% average in 2025 and New York Fed finds ~90% incidence on U.S. buyers, compressing margins or forcing price pass‑through. Winners are domestic upstream producers and non‑import competitors (steel, domestic machinery, some energy exporters) who see demand reallocation and pricing lift; Treasury receives revenue but net household welfare falls (~$1,300 per household estimated for 2026). Competitive dynamics favor firms with local supply chains or genuine pricing power; highly import‑elastic brands (mass retail, consumer discretionary) will lose share to domestic alternatives or face volume declines.

Risk assessment: Key tail risks are a Supreme Court injunction or ruling within ~30–60 days that removes tariff legal cover (sharp repricing), large retaliatory tariffs that reignite inflation, or a political rollback that reverts market structure. Near term (days–weeks) expect volatility around legal/political milestones and earnings; medium term (3–12 months) expect margin revisions and potential demand destruction; long term (1–3 years) could see reshoring capex benefiting industrials but higher structural consumer prices. Hidden dependencies include FX pass‑through (USD strength can blunt import price effects) and inventory cycles that can temporarily mask incidence.

Trade implications: Favor long inflation‑protection and domestic industrial exposure while shorting import‑exposed Earners: take modest shorts in GM (auto OEM) and selected import‑heavy consumer names; go long Nucor (NUE) or Steel Dynamics (STLD) and TIPS (TIP) as hedges. Use 3–9 month option structures to express uncertainty around the Court ruling and Q2 earnings: buy put spreads on GM (3–6 month) and buy call spreads on NUE to limit capital outlay. Pair trades: long NUE vs short GM (equal notional) to capture tariff redistribution.

Contrarian angles: Consensus expects broad consumer damage, but names with genuine pricing power (certain staples like PG) may re‑price risk and preserve/move margins — PG could be neutral/long via covered calls rather than outright short. The market may be overpricing permanent harm; if Court scales back tariffs or firms fully pass costs, inflation impulse fades and domestic cyclicals retrace. Historical parallel: 2018 tariff episodes produced transient margin hits but durable winners in upstream domestic supply — trade with event contingent sizing and strict stop rules.

Key Decisions for Investors

• Establish a 1.5–2.0% notional short position in GM (ticker GM) via a 3–6 month put spread to limit capital: sized for a downside earnings revision risk given the reported $1.1B hit; widen to 3% if Supreme Court affirms tariffs for >30 days.
• Allocate 1–2% to long exposure in Nucor (NUE) or Steel Dynamics (STLD) for 6–12 months to capture reallocated demand/pricing power from import substitution; consider 6–12 month call spreads to cap cost.
• Purchase 1–2% allocation to TIPS ETF (TIP) as inflation protection and duration hedge; increase to 3% if CPI re‑acceleration >0.3% m/m or tariff average stays >10% beyond next quarter.
• Implement a pair trade: long 1% NUE vs short 1% GM (equal dollar) to express relative value of domestic upstream beneficiary vs import‑exposed OEM, rebalance at quarterly earnings or after Supreme Court ruling within 30–60 days.
• Set explicit event triggers: if Supreme Court strikes down tariffs, close/trim shorts on import‑exposed names within 48 hours; if tariffs persist and average >10% on next monthly census, increase long industrials/TIPS exposure by +50%.