President Trump raised the taxes the United States imposes on imports last year to levels not seen in a century.
As a result, the prices of goods have risen and businesses that rely on imported products and supplies are struggling and some are having to close their doors. Still, the impact was not felt as sharply as some experts had predicted after Mr. Trump announced double-digit tariffs on imports from countries around the world in early April.
A new working paper from economists at Harvard and the University of Chicago helps explain why. This shows that the tariff rate paid by importers is significantly lower than the tariff rates announced by Mr Trump. Reasons include exemptions for certain countries and industries, reduced tax rates on some goods when they arrive in the U.S., and circumvention of the rules by some companies.
By analyzing the government's tariff revenues and the value of imports, economists concluded that the actual U.S. tariff rate was 14.1 percent at the end of September.
The amount represents about half of the tariff rate that the administration had officially announced. The average trade-weighted tariff rate for the United States was 27.4 percent in nominal terms in September, the authors estimate, down from a peak of 32.8 percent in April.
“The actual tariffs are much lower than announced, and that is one of the reasons why the impact was not as big as feared,” said Gita Gopinath, a Harvard economist and former first deputy managing director of the International Monetary Fund.
One factor was an exemption for products that were on ships en route to the United States at the time the tariffs were announced. Shipping goods by sea to U.S. ports often takes weeks, meaning tariffs paid by companies rose more slowly than what Mr. Trump had announced all year.
The product and country exemptions included semiconductors and some products containing them, a move widely seen as a favor to technology executives. Although officials said they would announce further tariffs on chips and electronics, they have not materialized.
As a result, companies paid an actual tariff rate of 9 percent on chips imported into the U.S., the authors calculated, well below tariff levels on other goods. And exports from semiconductor-producing countries, such as Taiwan, had a much lower actual rate (8 percent) than the official rate (28 percent).
Canada and Mexico also received significant exemptions from the nominally high tariffs that Mr. Trump imposed on them last year. Many goods, mostly made in North America, face no tariffs under the U.S.-Mexico-Canada agreement that Mr. Trump signed during his first term.
Because U.S. tariffs have been generally low in the past, many companies have not bothered to declare that their goods comply with the trade agreement when filing customs forms. But in 2025, about 90 percent of goods coming from Canada and Mexico will be declared compliant, up from less than 50 percent the previous year.
Customs evasion has also led to a decrease in the actual duties paid by companies. Companies can use different strategies, many of which are illegal, to change the information on customs forms about the contents, value or origin of a product and pay a lower duty than intended.
As affordability concerns grow, the Trump administration could offer further waivers and delays to planned tariffs. On Wednesday, Mr. Trump issued an executive order to delay by a year a planned increase in tariffs on vanities, kitchen cabinets and upholstered furniture. The Commerce Department also withdrew a preliminary plan to impose tariffs on some Italian pasta imports, saying some pasta makers had taken into account U.S. concerns about unfair practices. A final decision is expected in March.
Who pays the tariff?
This phenomenon does not mean that tariffs do not burden US companies and consumers. The researchers showed that Americans bore the cost of Mr. Trump's tariffs, contrary to what he and his advisers had claimed.
When the United States imposes a tariff, it is the importer of record — usually a U.S. company — who must pay that money to the government. But who really bears the full cost of the tariff is a different question. The foreign factories that export products to the United States could bear the cost if they lower the prices they charge American buyers to offset the tariff.
The Trump administration argued that this would happen. But Ms. Gopinath and her co-author Brent Neiman of the University of Chicago have calculated that U.S. importers, not foreign suppliers, bear the bulk of the costs. They estimated that in 2025, 94 percent of tariff costs would be “passed through” to U.S. companies. That compares with about 80 percent in 2018-19, when Mr. Trump imposed numerous tariffs on China.
Economists only have data for a few months in which the tariffs are fully in effect. So much more will be known over the next year. But tariffs have significantly changed global trade. For example, China's share of U.S. imports collapsed to 8 percent at the end of 2025, compared to 22 percent at the end of 2017.
US consumers and manufacturers also pay higher costs. A working paper published in November by economists at Harvard Business School and elsewhere found that tariffs had pushed up prices of imported goods by about twice as much as domestic goods.
Ms. Gopinath and Mr. Neiman also examined the impact of tariffs on U.S. manufacturers, which often rely on foreign parts and metals. They found that companies making heavy trucks, construction vehicles, cars and auto parts, farm equipment, and oil and gas machinery were hit hardest by higher tariffs.
“The logic was that if foreign companies wanted to sell in the world’s largest consumer market, they would have to pay a price,” Ms. Gopinath said. “In reality, the price was borne by U.S. companies, not foreign companies.”