A new report from the New York Federal Reserve Bank confirms what economists have long warned:The burden of care is borne almost entirely by the residents of the implementing country.. This simple fact—now being demonstrated in 21st-century America—is as fundamental a lesson in introductory economics courses as the theory of supply and demand. This has always been the case!
Research by the New York Fed found that U.S. businesses and consumers will bear nearly 90% of the cost of import tariffs in 2025 that year. This is not surprising: The National Bureau of Economic Research and the Congressional Budget Office (CBO) recently came to much the same conclusion.
The New York Fed report did not break down the share borne by businesses versus consumers, but a CBO report released Wednesday estimated that businesses will continue to squeeze margins slightly to offset the additional costs, whileMost of the tax burden (70%) is passed on to consumers. (As for foreign exporters, whom President Trump has long claimed will foot the bill? CBO estimates they only bear about 5 percent of the cost.)
In real dollars, the nonpartisan Tax Foundation data shows that the 2025 tariffs would be equivalent to an average tax increase of $1,000 per American household.
On the one hand, these are just standard academic reports published by one group of nerds, for another group of nerds. For Trump, the collective wisdom of economists has always been insignificant in front of Guan, what he calls "the most beautiful word in the dictionary."
But the reports from the CBO and the New York Fed come at a time when Washington is mired in “concern fatigue.”
Six House Republicans on Wednesday joined forces with Democrats in a rare vote to effectively repeal Trump's tariffs on Canada, an open rejection of Trump's signature economic agenda. It should be noted that these restrictions will not be repealed - even if the bill passes the Senate, Trump will use his veto power. But as one might expect, the backlash from members of his own party did not please the White House. Shortly after the vote, Trump threatened that any Republicans in Congress who voted against Trump would face "consequences."
Meanwhile, the Supreme Court could rule at any time on the legality of Trump's concerns, which could completely upend his entire agenda.
White House spokesman Khush Desai defended the tariff agenda in a statement, noting that although "the average U.S. tariff rate has increased nearly sevenfold," inflation has cooled and corporate profits have increased.
"The fact is that President Trump's economic policies of tax cuts, deregulation, increased tariffs and energy abundance are lowering costs and accelerating economic growth," he said.
Of course, all of this is happening at a time when ordinary Americans are fuming over the soaring cost of living and increasingly blaming Trump and Republicans. Trump’s campaign promise of “lowering prices on his first day in office” has not been fulfilled at all. (Except for a few commodities, such as eggs — which we can count him winning, largely because of farmers' efforts to contain the avian flu that has squeezed egg supplies and skyrocketed prices.)
Looking at the data, the U.S. economy is doing well. This is largely because economies are measured in terms of averages and aggregates.
Take the January jobs report released on Wednesday. Overall, the data was unusually strong, with 130,000 jobs added, nearly double what economists expected. But a closer look reveals that nearly all of the job growth is coming from one industry, health care. Digging deeper, every other industry is either experiencing sluggish growth or job losses. In fact, for all of 2025, health care and social assistance accounted for 97% of all job growth.
It’s a classic example of what KPMG economist Diane Swank calls the “one-legged stool” that supports the entire economy. The other two "one-legged stools" are: the crazy consumption of the rich, and the hundreds of billions of dollars invested by technology giants in artificial intelligence infrastructure.