Tariffs Are Taxes: Economics 101 the White House Hopes You Skipped

In April 2025, the United States imposed the most sweeping tariff increases since the Smoot-Hawley Act of 1930. By January 2026, the effective average tariff rate on all US imports had risen to approximately 22.5% — the highest level in nearly a century. The administration called them "tariffs on foreign countries." Economists — left, right, and center — call them what they are: taxes on Americans.

What Is a Tariff, Exactly?

A tariff is a tax levied by the US government on goods entering the country. It is assessed at the port of entry and paid by the US importer of record — an American company, not a foreign government. This is not a matter of opinion; it is a matter of law. Title 19 of the US Code, Section 1505, requires the importer to deposit estimated duties with US Customs and Border Protection (CBP) before goods are released.

In fiscal year 2025, CBP collected approximately $135 billion in customs duties — up from $80 billion in FY2024 and just $49 billion in FY2017 before the trade war began. Every dollar came from an American company's bank account.

The Pass-Through Mechanism

When an American retailer imports a product subject to a 25% tariff, the arithmetic is straightforward. A container of goods with a customs value of $100,000 now costs $125,000 before it even leaves the port. The importer has three options:

1. Absorb the cost — reduce profit margins (rarely sustainable long-term)
2. Pass it through — raise prices to consumers
3. Shift sourcing — find a non-tariffed supplier (often more expensive anyway)

Decades of research, including landmark studies by economists Amiti, Redding, and Weinstein (2019) at the Federal Reserve Bank of New York, found that the tariffs imposed in 2018-2019 were almost entirely passed through to US import prices. The foreign exporters did not lower their prices to absorb the tax. American consumers and businesses paid the full cost.

The Data: 2025-2026 Tariff Revenue

Who Says Tariffs Are Taxes?

This isn't a partisan claim. It is the consensus of the economics profession:

"Tariffs are taxes, paid for by the American consumer. They are not paid by China or any other country."
— National Taxpayers Union, 2025

"A tariff is a tax on imports. It is paid by the domestic importer, who then passes the cost on to consumers through higher prices."
— N. Gregory Mankiw, former Chair of the Council of Economic Advisers (George W. Bush)

"Trade wars are class wars."
— Matthew C. Klein & Michael Pettis

The Tax Foundation, the Cato Institute, the Peterson Institute, the Brookings Institution, the American Enterprise Institute, and virtually every mainstream economics department in the country agree: tariffs are taxes paid by Americans.

The "Foreign Countries Pay" Myth

The claim that foreign countries pay tariffs confuses two different things: who writes the check (always the US importer) and who bears the economic incidence (the question of how the tax burden is shared between buyers and sellers). Even on the question of economic incidence, the empirical evidence is overwhelming: US importers and consumers bore virtually 100% of the cost of the 2018-2019 tariffs.

A study by Fajgelbaum et al. (2020), published in the Quarterly Journal of Economics, found that the tariffs imposed in 2018 cost US consumers and importing firms $51 billion per year, while producing only $9 billion per year in tariff revenue gains for the government — a net welfare loss of $7.2 billion.

Why It Matters

As of early 2026, the combined tariff burden on American households is estimated at approximately $3,800 per household per year by the Budget Lab at Yale, or approximately $4,900 by the Tax Foundation. For a family earning $50,000, that represents a 7.6% to 9.8% effective tax increase — one that was never voted on by Congress.

Understanding that tariffs are taxes is not an ideological position. It is a prerequisite for honest policy debate. You can argue that the tax is worth paying for strategic reasons. You can argue it protects vital industries. But you cannot honestly argue that someone else is paying it.

Every tariff is a tax. The only question is whether it's a tax worth paying.