For the past year, American consumers have been largely shielded from the true cost of the Trump administration's tariff policies. Businesses absorbed the import taxes, cutting margins rather than raising prices. According to new analysis from JPMorgan, that era of protection is ending.

The math is stark. When 2025 began, the average U.S. tariff rate stood near 2.5%. As of this week, that same rate has soared above 15.8%—the highest level in more than 80 years, according to calculations from the Tax Foundation. The United States collected $187 billion more in tariff revenue in 2025 than in 2024, a nearly 200% increase.

Yet consumer prices, while elevated, haven't reflected the full magnitude of this policy shift. The reason, according to JPMorgan economists, is that businesses "footed roughly 80% of the tariff bill last year." That ratio is about to change dramatically.

The 80/20 Flip

JPMorgan's analysis suggests that the 80% business absorption rate "could shrink to 20% later this year." In practical terms, this means consumers will begin paying for tariffs they've so far avoided.

The shift is happening for several reasons:

  • Margin exhaustion: Many businesses absorbed tariff costs by accepting lower profits. After a year of margin compression, there's little room left to cut.
  • Inventory depletion: Companies that stockpiled goods before tariffs took effect have burned through those inventories. New purchases come at tariff-adjusted prices.
  • Competitive dynamics: When one company raises prices, competitors often follow. The industry-wide pressure to pass through costs creates cover for price increases.
  • Contract renewals: Many business-to-business contracts are annual. As 2024-era agreements expire, new pricing reflects current tariff realities.

What 15.8% Tariffs Mean in Practice

The abstract concept of "15.8% average tariffs" translates into concrete price impacts across the economy. Previous analyses have estimated the cumulative effect on household budgets:

  • Yale Budget Lab estimate: The typical American household will pay an additional $1,400 to $1,800 annually due to tariff-driven price increases, depending on consumption patterns.
  • Appliances and electronics: Items like washing machines, televisions, and smartphones—heavily imported from China and Southeast Asia—face some of the steepest tariffs.
  • Apparel and footwear: Clothing and shoes, largely manufactured overseas, carry tariffs that range from 25% to over 100% on certain categories.
  • Food products: While most food is produced domestically, ingredients, packaging, and equipment often cross borders, adding costs throughout the supply chain.

"Tariffs are here to stay," noted Terry Haines, founder of political risk consultancy Pangaea Policy. "As the calendar flips to 2026, analysts see only limited opportunities for deescalation in the year ahead."

The Inflation Wildcard

The tariff pass-through creates a challenge for the Federal Reserve. The central bank has been battling to bring inflation down to its 2% target, and it's made significant progress—core inflation has fallen from peaks above 5% to approximately 2.7%.

But tariff-driven price increases could reverse that progress. If businesses begin passing through costs in earnest during 2026, headline inflation could reaccelerate, complicating the Fed's plans for further interest rate cuts.

Philadelphia Fed President Anna Paulson acknowledged this dynamic in recent remarks: "Higher import costs from tariffs are likely to keep goods prices elevated through the first half of 2026," she noted, though she expects those pressures to fade later in the year.

The timing matters for markets. If inflation rebounds just as the Fed was preparing to ease, interest rates could stay higher for longer—a scenario that would pressure both stocks and bonds.

Tariff Revenue vs. Consumer Cost

President Trump has suggested that tariff revenue could fund consumer benefits, including a proposed $2,000 "dividend" for every American household. However, the arithmetic is challenging:

  • Projected tariff revenue for 2026: Approximately $207.5 billion
  • Cost of $2,000 payments to every household: Between $280 billion and $607 billion, depending on eligibility criteria
  • The gap: Tariff revenue falls far short of what would be needed to offset the consumer cost of tariffs through direct payments

The Tax Foundation analysis suggests that the "tariff dividend" proposal has no finalized plan and would require either additional funding sources or a dramatically scaled-down program.

Sector-by-Sector Impact

Not all industries face equal tariff exposure. The pass-through will hit some sectors harder than others:

Most exposed:

  • Consumer electronics retailers
  • Apparel and footwear companies
  • Automotive parts suppliers
  • Furniture and home goods

Partially shielded:

  • Domestic manufacturers (benefit from reduced import competition)
  • Service industries (fewer imported inputs)
  • Companies with diversified supply chains (can shift sourcing)

The furniture sector received a notable reprieve when Trump delayed a 30% tariff increase on upholstered furniture for one year. But that delay is an exception—most tariff rates are locked in and will remain in force.

The Supreme Court Wildcard

One potential game-changer looms on the legal horizon. The Supreme Court will decide in Learning Resources v. Trump whether the president can impose sweeping tariffs under emergency powers without congressional approval.

A ruling against the administration could force the government to refund more than $100 billion in tariffs already collected and curtail Trump's ability to maintain the current tariff regime. However, that decision isn't expected until mid-2026 at the earliest.

What Consumers Should Expect

For American households, the practical implications are straightforward:

  • Expect price increases: Items that were stable in 2025 may rise in 2026 as tariff costs pass through.
  • Budget accordingly: Households should prepare for moderately higher prices on imported goods.
  • Watch for substitution opportunities: In some categories, domestic alternatives may become more competitive as import prices rise.
  • Be skeptical of "tariff dividend" promises: Until a concrete program is announced and funded, assume no offset is coming.

The Bottom Line

The trade war's true cost has been deferred, not avoided. As JPMorgan's analysis makes clear, 2026 is when American consumers will begin feeling the impact of tariff policies that have already reshaped global trade flows. With average rates at 80-year highs and businesses running out of margin buffer, the price adjustment is coming. Households should prepare their budgets accordingly.