The Trump administration's tariff policies represented the most dramatic reordering of American trade policy in nearly a century. By November 2025, the effective tariff rate on U.S. imports had climbed to nearly 17%—seven times higher than January's level and the highest since 1935, when the world was still recovering from the Great Depression and the Smoot-Hawley trade war.

For American households, this policy shift carried a tangible cost: an average of $1,200 in additional expenses over the course of 2025, according to analysis from the Tax Foundation. That figure is projected to rise to $1,400 per household in 2026 as the full impact of tariffs works through supply chains and into consumer prices.

How Tariffs Became a Tax

Despite political rhetoric framing tariffs as a tax on foreign countries, economists across the political spectrum agree on a fundamental truth: tariffs are paid by American importers and ultimately passed on to American consumers. They function as a consumption tax, raising prices on imported goods and, through competitive dynamics, on domestic goods as well.

Research from the Harvard Business School Pricing Lab found that prices on imported goods rose approximately 4% between March and September 2025, while domestic goods—ostensibly protected by tariffs—rose about 2%. The domestic price increase reflects the reduced competitive pressure from imports, allowing American manufacturers to raise prices without losing market share to foreign competitors.

"Tariffs are functionally a regressive tax. Lower-income households spend a larger share of their budgets on goods, so they bear a disproportionate burden of tariff-driven price increases."

— Economic analysis from the Tax Policy Center

The Revenue Windfall—and Its Limits

The administration's tariff policies generated substantial revenue: more than $236 billion through November 2025, far exceeding historical norms. Yet this figure falls dramatically short of suggestions that tariff revenue could replace federal income taxes.

Federal income taxes generate roughly $2.5 trillion annually. To replace that revenue entirely through tariffs would require either astronomical tariff rates that would effectively end most international trade, or an expansion of tariffed goods that would include virtually everything Americans consume. Neither scenario is economically viable.

Where the Money Came From

  • China: Tariffs on Chinese imports now average 47.5%, generating the largest share of customs revenue despite a 25% decline in import volumes
  • Mexico and Canada: "Reciprocal" tariffs on USMCA partners contributed significantly, though some have been paused or modified through negotiation
  • European Union: Automotive and industrial tariffs remain a point of ongoing trade tension
  • Global baseline: A broad-based tariff affecting imports from virtually all countries provided the foundation of the tariff structure

Winners and Losers

The tariff regime created clear winners and losers across the American economy.

Industries That Benefited

Domestic Manufacturing: Some American manufacturers, particularly in steel, aluminum, and other commodities, gained protection from foreign competition. U.S. Steel's stock rose as import competition declined, though the company still faced challenging market conditions.

Reshoring Initiatives: Companies accelerating plans to bring production back to the United States found the tariff environment supportive of their investments. Semiconductor facilities and battery plants broke ground across the country.

Industries That Suffered

Importers and Retailers: Companies dependent on imported goods faced margin compression or painful decisions about passing costs to consumers. The surge in corporate bankruptcies to 15-year highs traces partly to tariff pressures.

Exporters: Retaliatory tariffs from trading partners squeezed American exporters, particularly in agriculture and technology. Farm incomes declined as Chinese purchases of American soybeans and other commodities remained well below pre-trade-war levels.

The Trade Deficit Paradox

One of the administration's stated goals was reducing the trade deficit—the gap between what America imports and exports. On this metric, the tariffs achieved measurable results. The monthly trade deficit, which hit a record $136.4 billion in early 2025, fell to less than half that level by autumn.

But economists caution against interpreting this as an unambiguous success. Trade deficits reflect deeper economic forces—savings and investment patterns, currency valuations, and relative economic growth rates—that tariffs address only superficially. The decline in the deficit came primarily from Americans buying fewer imported goods, not from a surge in American exports.

The China Reorientation

Perhaps the most lasting impact of the tariff policies has been the restructuring of trade flows with China. Once America's largest source of imports, China has fallen to third place behind Canada and Mexico. The value of goods imported from China fell nearly 25% during the first three quarters of 2025.

This shift has accelerated the "friendshoring" trend—relocating supply chains from geopolitical rivals to allied nations. Vietnam, India, Mexico, and other countries have attracted investment from companies seeking to reduce China exposure while maintaining cost advantages.

Yet the transition carries its own costs. Supply chains built over decades don't relocate overnight. Many products—from electronics components to rare earth minerals—remain difficult or impossible to source outside China at competitive prices. Companies face years of investment and uncertainty as they rebuild supplier networks.

What Comes Next

The legal status of the tariff regime remains contested. In August, a federal appeals court ruled that certain tariffs exceeded presidential authority under the International Emergency Economic Powers Act. The Supreme Court heard arguments on the appeal in November, with a decision expected in the first half of 2026.

Regardless of the legal outcome, the tariff policies have reshaped expectations. Businesses are planning for a world of higher trade barriers and greater supply chain scrutiny. Investment decisions made in 2025 will echo for years, even if tariff rates eventually moderate.

Practical Implications for Consumers

  • Expect continued price pressures: Even if tariffs stabilize, the $1,400 per household cost projection for 2026 suggests inflation will remain elevated on affected goods
  • Look for "made in USA" alternatives: Domestic products may become more price-competitive as tariffs raise import costs
  • Consider timing major purchases: Some goods may see price relief if tariffs are modified or struck down
  • Budget for import-heavy categories: Electronics, clothing, and home goods remain disproportionately affected by tariff costs

The tariff experiment of 2025 demonstrated that trade policy carries real costs for ordinary Americans. Whether those costs are justified by the policy's goals—reducing trade deficits, pressuring geopolitical rivals, supporting domestic manufacturing—remains a matter of intense debate. What's not debatable is the $1,200 that tariffs added to the average American household's expenses this year.