EDW | Tariffs: Who Pays, What They Are, and Why This Fight Matters

A tariff is not a magic wand. It’s not a vibe. It’s not a “fee” we mail to another country.

A tariff is a tax on imports. A customs duty. Collected at the border from the importer of record, usually a U.S. company bringing goods into the United States.

So who actually pays?

Here’s what the data says, especially in modern U.S. tariff episodes: most of the cost lands here at home. It shows up as higher prices for consumers and/or thinner margins and higher costs for U.S. businesses.

The New York Fed’s Liberty Street Economics analysis of 2025 tariffs finds the average U.S. tariff rate jumped from 2.6% to 13%, and estimates that the burden was largely borne by U.S. firms and consumers, with nearly 90% of the tariff burden overall borne domestically and the estimated pass-through of tariff changes into import prices falling to 86% in November.

In other words: the “foreigners pay” slogan isn’t how this has worked in practice.

Yes, foreign exporters can absorb some of the hit. Sometimes they cut prices. Sometimes currencies move. But the overall story is consistent: Americans pay most of it, either at the checkout line or inside company balance sheets.

And now zoom out to the politics.

On February 21, 2026, Reuters reports President Trump said he would raise a temporary, across-the-board tariff from 10% to 15% under Section 122. Reuters notes that Section 122 is time-limited unless Congress extends it after 150 days.

Translation: this isn’t just “trade policy.” This is a fight over whether a president can functionally impose a broad tax change by executive move, and then sell it as if someone else will cover the bill.

Tariffs can raise federal revenue. CBO’s February 2026 outlook projected that higher tariffs would reduce deficits by $3.0 trillion over 2026–2035, and that customs-duty receipts would rise as a share of GDP in the near term. That estimate assumed the tariffs in place on November 20, 2025 would remain in effect, so it predates the Supreme Court’s February 20 ruling and the new Section 122 announcement.

But “revenue” isn’t the same thing as “value.” Tariff revenue is a tax collected from an economy that is also paying higher prices and adapting through slower, costlier supply chains.

So here’s the simplest public-service sentence we can offer:

If your leader is angry they can’t impose sweeping tariffs the way they want, they’re angry they can’t impose a sweeping tax the way they want, without Congress.

That is the argument. That is the civics lesson. And that is why “who pays?” isn’t trivia, it’s the whole point.