Tariff, Tariffs, Tariffs: Who Really Pays?

By Halina de Jong-Lambert, Economic Policy
Photo: Randy Caparoso, CC BY-SA 4.0 , via Wikimedia Commons

We’ve all heard the word surface again and again in the news recently, from Trump’s policy agenda to numerous countries responding with reciprocal tariffs. Their effects span from countries, rates, and goods. The question is, just how impactful is this oft-wielded economic policy, and what kind of impact will it wield on us, the American consumers?

A tariff is a tax imposed by the government on goods and services imported from other countries, with the hopes of bolstering domestic production over imports. In theory, the tariff raises costs for the foreign competitor, leading them to reduce their exports to us, forcing us to buy more closer to home. However, the reality is a bit more complicated. The Congressional Budget Office describes the effect of tariffs on output and GDP as “ambiguous”: it can prompt consumers to buy more domestically, but the subsequent cost increase for goods decreases purchasing power and can cause firms to delay investments. The general consensus among economists is that free trade policies like low tariffs increase economic growth more than the protectionist policy of high tariffs. This has encouraged the growth of free trade policies internationally in recent decades. (Congressional Budget Office 2025)

Tariffs, while meant to be singular in impact, often end up ricocheting between industries and consumers as businesses balance between absorbing the increased cost and passing it on to consumers. Walmart’s struggle to absorb the recent sharp increase in international tariffs is a telling example. The company, known for providing affordable prices for a range of necessities from food to furniture, drew headlines in May 2025 when a company earnings call was leaked where CEO Doug McMillion said the company isn’t “able to absorb all the pressure given the reality of narrow retail margins.” (USA Today 2025) Despite the company earning more than $165 billion in first-quarter revenue for 2025 according to Investopedia, Walmart Corporate Affairs Director Joe Pennington indicated a wary future outlook. In an email to Investopedia, he explained, “We have always worked to keep our prices as low as possible and we won’t stop. We’ll keep prices as low as we can for as long as we can given the reality of small retail margins.” (Investopedia  2025) Soon after, Walmart CFO and Executive Vice President told CNBC that prices could rise as early as the end of that month. (CNBC 2025)

President Trump responded to Walmart’s situation by posting on Truth Social, “Walmart made BILLIONS OF DOLLARS last year, far more than expected. Between Walmart and China they should, as is said, ‘EAT THE TARIFFS’, and not charge valued customers ANYTHING.” (CNBC 2025)

The dilemma of how to face this sharp cost comes in a different form for smaller companies. Imagine you own a small vineyard in southern France (dream!), making a select variety of Sauvignon Blanc that you know American consumers can’t get enough of. It’s March 2025: Trump just passed a luxury and wine goods tax on France, and you just got the news that you will now face a 25% tariff on all the bottles of your golden liquid you want to ship to the US. (The Global Statistics 2025) Will you follow Trump’s advice? Chances are, you can’t afford to simply absorb this sharp increase in costs. Given you certainly don’t have a roomier profit margin than Walmart, you face two options. Either stop selling to the US, and lose a significant portion of your consumer base, or raise your prices and hope consumers will keep buying. What will you do? 

If your goods are deemed a “luxury,” your consumer base will likely be pretty unresponsive to a change in price, as they have the funds to cover it and are used to paying a higher price to be able to say their wine hails from Saint-Émilion. In this case, you can simply raise your prices to pay the tariff, shifting the tariff burden to your consumers.

But most goods, especially within the sweeping range Trump has imposed, are not luxuries. Take India as an example. Some of the goods and services we rely on them for include information technology and software services. We consume over half their exports in this category as well as pharmaceuticals, as India is colloquially known as the pharmacy of the world. (The Kanso 2025) This has made the US’s August 2025 50% tariff against India, as reported by CNBC, the subject of skepticism from leading economists. (CNBC 2025)

So when high tariffs hit, where do they fall? On domestic consumers, and hard. But it doesn’t come directly; part of the sneaky reciprocal effects of tariffs is that they increase production and labor costs for the same home producers they are meant to protect, including major corporations (Brookings 2025). Reuters reported that automakers, consumer goods producers, and airlines are the worst hit sectors, with the pharmaceutical giant Johnson and Johnson and major airlines like Southwest Airlines and American Airlines reporting significant financial hits and profit margin warnings (Reuters 2025). In the key oil and gas sector of the US economy, a Dallas Fed Survey published September 24th reported rising input costs across all firms and a steep drop in the company outlook index, indicating a bleak outlook on the future among executives (Dallas Federal Reserve 2025). As Walmart CEO Doug McMillon vocalized, even major corporations can’t absorb a steep input cost hike forever; eventually, they will impart those added costs onto consumers. As labor, input, and production costs rise, American consumers are likely to be faced with increasingly uncomfortable prices from a range of previously reliably affordable companies.

The Consumer Price Index, which tracks price fluctuations for a collection of urban consumer goods like groceries and medical care, shows an increase in the prices of these goods by 2.9% since last August (for context, the Federal Reserve aims to maintain a 2% long-run inflation rate). This is a .2% increase from this June and July. Even excluding more volatile food and energy prices, inflation has risen 3.1% since last year. (Investopedia 2025) Inflation being a bellwether for many aspects of the economy, it is difficult to pin its recent rise entirely on tariffs. But a recent joint survey of CFOs from the Atlanta and Richmond Federal Reserve Banks, in partnership with Duke’s Fuqua School of Business, found that tariffs were the top issue cited by executives, and that, although “confusion” around tariffs was starting to dissipate, they admitted more price hikes are in the future. (Richmond Federal Reserve, 2025)

As a result of President Trump’s insistent tariff policies, American consumers are faced with higher prices at home and on imported alternatives for necessary items. In late August 2025, small personal orders, like a bag of Brazilian coffee beans, started facing import tariffs coming into the US for the first time. The result? Many companies, in the same position as our cash-strapped French vineyard, have had no choice but to charge the tariff to American customers. CNBC, in an article titled, “New Tariff rules bring ‘maximum chaos’ as surprise charges hit consumers”, reported that many Americans have faced shipping costs that far exceed the price of what they purchased for goods imported from abroad. (CNBC 2025)

As tariffs continue to dominate US economic policy and ricochet around the globe, they are prompting increasingly harsh responses from other nations. China, who had previously purchased roughly 54% of all US Soybean exports according to WAVY Norfolk, imposed retaliatory tariffs on US soybeans followed by an all-out purchasing ban in May (WAVY Norfolk 2025). How other countries and US companies may continue to respond to rolling tariffs is uncertain; but calls from economists and business leaders provide a pressing warning to the American people that the brunt of the burden is likely to fall on them.

References

Archana. 2024. “15 Indian Imports That America Can’t Do Without.” The Kanso. https://thekanso.com/indian-imports-that-america-cant-do-without/ (October 8, 2025).

Wessel, David, and Elijah Asdourian. 2025. “What Are Tariffs, and Why Are They Rising?” Brookings. https://www.brookings.edu/articles/what-are-tariffs-and-why-are-they-rising/ (October 9, 2025).

Barber, Rachel. 2025. “Walmart Says to Expect Price Hikes Due to Tariffs. What Will Get More Expensive and When?” USA Today. https://www.usatoday.com/story/money/2025/05/21/walmart-price-hikes-when/83766451007/

(October 9, 2025).

“CFOs Report Increased Optimism as Uncertainty Fades.” Richmondfed.org. https://www.richmondfed.org/research/national_economy/cfo_survey/data_and_results/2025/20250924_data_and_results (October 10, 2025).

“Dallas Fed Energy Survey.” Dallasfed.org. https://www.dallasfed.org/research/surveys/des (October 8, 2025).

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Marino-Nachison, David. 2025. “President Trump Says Walmart Should ‘Eat the Tariffs.’” Investopedia. https://www.investopedia.com/president-trump-says-walmart-should-eat-the-tariffs-11737234 (October 8, 2025).

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Winters, Mike, and Gabriel Cortés. 2025. “From Bananas to Toys, These 5 Charts Show How Much Costs Have Risen since Trump’s Tariffs Went into Effect.” CNBC. https://www.cnbc.com/2025/09/13/charts-how-much-costs-have-risen-since-trump-tariffs-went-into-effect.html?msockid=3638572f5680667d35cc431857e76725 (October 8, 2025).

Hyatt, Diccon. 2025. “Inflation Is Running High—Here’s What Experts Expect for the Rest of the Year.” Investopedia. https://www.investopedia.com/inflation-is-running-high-what-experts-expect-for-q4-2025-11816488 (October 9, 2025).