John Dickerson goes inside the numbers on who actually pays when tariffs are levied against imports.

Washington

A recent analysis highlights that U.S. businesses and consumers are the primary payers of tariffs imposed on imported goods. Contrary to some political claims, studies from the Federal Reserve Bank of New York and Goldman Sachs show that the costs of tariffs are almost entirely passed on to domestic prices, with American firms paying the import tax and often passing these costs to consumers.

Data indicates that American businesses have absorbed the majority of tariff costs, with consumers covering a significant and growing share. Small businesses, in particular, face substantial financial burdens and are more likely to pass these costs on to consumers, resulting in higher prices for families. The evidence suggests that tariffs generate revenue for the government, but the financial impact is felt most by Americans themselves.

Who actually pays tariffs?

Last May, Treasury Secretary Scott Besson testified before Congress and was asked, who pays tariffs? Did you remember the question? I'm not sure you did. Who pays tariffs? It's a very complicated question. Most economists think it's straightforward, and U.S. firms are the ones who pay the import tax to the American government. They either absorb the cost or pass it on to consumers. A Federal Reserve Bank of New York study of President Trump's first-term tariffs on China found they were, quote, almost completely passed through into U.S. domestic prices, and that the tariff revenue was a, quote, pure transfer from domestic consumers. The president says otherwise. We've taken in billions and billions of dollars in tariffs from China. This was false in 2019 in his first term when he said it, and it's false now. Countries don't pay tariffs. Foreign companies might reduce their export prices to maintain their U.S. market, but that's not paying tariffs, and it's not happening much. Such firms have absorbed only 14 percent of the recent tariff costs. That's according to a Goldman Sachs report that was out today. The rest of the cost falls on U.S. businesses and U.S. consumers. American businesses have paid 64 percent of the tariffs, and consumers have covered 22 percent. Goldman Sachs says the situation will worsen for consumers. Soon, they're expected to cover 67 percent of the tariff burden, as companies like Nestle announce that they can no longer absorb the costs. According to a July estimate from the U.S. Chamber of Commerce, before Trump's tariffs went into effect on August 7th, the combined import tax for America's 236,000 small businesses would amount to $202 billion annually. That's approximately $856,000 per firm. Small businesses with less financial cushion are more likely to pass those costs on to consumers. $2,400 a year per family, according to the Yale Budget Lab. Tariffs are bringing in record revenue, and as expected, the data shows Americans and American companies are paying it.

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