American households are now carrying nearly the full cost of President Donald Trump’s tariff programme, according to new research from the Federal Reserve Bank of Dallas, which found companies have largely stopped absorbing higher import costs and are instead raising prices for consumers.
The study, published last week, concluded that tariffs introduced during Trump’s current trade agenda are now showing a “full pass-through” into consumer inflation. Economists at the Dallas Fed estimated that core inflation in March would have been substantially lower without the tariffs, suggesting trade policy has become a meaningful contributor to persistent price pressures across the US economy.
The findings add to a growing body of evidence challenging Trump’s repeated claims that foreign exporters bear the financial burden of tariffs. Instead, Federal Reserve researchers argue that American businesses and shoppers are paying most of the bill through higher import costs and retail prices.
Core inflation climbed as tariff costs spread
Researchers focused on “realized tariff rates,” measuring duties actually collected at US borders rather than relying on headline tariff announcements from the White House. The distinction matters because companies often delay price increases, shift supply chains, or search for alternative suppliers before fully passing costs through to consumers.
According to the Dallas Fed paper, realized tariff rates reached 9.4% by the end of 2025, the highest level seen in decades despite remaining below some earlier projections based on announced trade measures.
The report estimated that US core inflation, which excludes food and energy prices, reached 3.2% year over year in March. Without tariffs, economists calculated the figure would have been closer to 2.3%, nearly a full percentage point lower.
The study suggests companies have now exhausted many of the strategies initially used to soften the impact of tariffs. Businesses previously attempted to protect consumers by sourcing products domestically, renegotiating supplier contracts, or spreading costs across operations. Economists now believe those buffers have largely disappeared.
Separate Federal Reserve research published last month found that companies typically take around seven months to fully transfer tariff-related costs to customers. The authors wrote that when import costs rise by $1 because of tariffs, retailers ultimately increase prices by the same amount in order to preserve profit margins.
Businesses appear to have little room left to absorb costs
The Dallas Fed findings closely align with earlier work from the New York Federal Reserve and independent tax analysts. A February study from the New York Fed concluded that American consumers and businesses were covering close to 90% of tariff-related costs rather than foreign exporters.
Meanwhile, the Tax Foundation estimated Trump’s 2025 tariff measures amounted to roughly a $1,000 annual tax increase for the average US household. Even under a reduced tariff structure expected in 2026, the group projected the average household burden would remain around $700 per year.
The broader economic concern for policymakers is that tariffs may complicate the Federal Reserve’s efforts to return inflation closer to its long-term 2% target. Persistent inflation has already delayed expectations for aggressive interest rate cuts this year, particularly as consumer prices remain elevated in several sectors tied to imported goods.
Trade economists have historically warned that tariffs operate similarly to consumption taxes because importers pay duties at the border before incorporating those costs into retail pricing. The latest Federal Reserve research strengthens that argument by suggesting the adjustment period is now largely complete.
The Peterson Institute for International Economics has previously estimated that modern global supply chains make it increasingly difficult for companies to shield consumers from broad-based import taxes, particularly in sectors such as electronics, machinery, apparel, and household goods where foreign sourcing remains dominant.
Investors are watching whether inflation pressures persist
The next major question for investors and policymakers is whether tariff-related inflation proves temporary or becomes more deeply embedded in consumer pricing.
If import costs continue feeding into inflation throughout 2026, the Federal Reserve may face pressure to keep interest rates elevated for longer than markets currently expect. Higher borrowing costs could weigh on consumer spending, corporate investment, and housing demand at a time when economic growth has already begun to moderate.
Markets will also be watching whether businesses continue raising prices at the same pace or whether weakening consumer demand eventually limits their ability to pass costs through. For now, Federal Reserve researchers appear increasingly convinced that American consumers, rather than foreign producers, are carrying the bulk of the tariff burden.
