Kyle Pomerleau explores tariffs’ impact on the American economy.
Tariffs have become an important economic policy in the United States. Tariffs are a form of excise tax that applies to imported goods. They can be imposed for three, sometimes contradictory, reasons: to generate revenue, protect domestic industries, and retaliate against other countries for economic or non-economic reasons. As with other taxes, tariffs have important equity and efficiency considerations. Although they can raise revenue and protect certain domestic industries, they reduce economic output, misallocate resources in the economy, reduce the quantity and quality of goods and services available to consumers, and burden households with lower real after-tax incomes. In the current environment, tariff policy has been a source of uncertainty for businesses and households both because of the Administration announcing tariffs and then changing the rates or delaying their imposition, as well as because of legal challenges that have struck down tariffs. …
… Evidence on the latest round of tariffs suggests that the pass-through is almost 100%, that is, United States consumers are bearing the full costs of tariffs (Gopinath and Neiman 2026). Between March 2025 and May 2026, The price of imported goods rose by 6.8 percent relative to a pre-tariff price trend between March 2025 and May 2026, as measured by a study that tracks the online prices of over 350,000 products sold at five large U.S. retailers. The largest price increases observed were in carpets and other floor coverings (54 percent), other articles of clothing and clothing accessories (24 percent) coffee, tea, and cocoa (16 percent), and fish and seafood (16 percent). …
… When the price of an imported good rises due to a tariff (or for other reasons), domestic producers who sell goods that compete with those imports raise the price of their goods as well since they have less competitive price pressure from foreign goods.
