U.S. households paid $1,000 more for the same items over the past year, with low-income households hit hardest.
One year ago today, during a Rose Garden ceremony at the White House in Washington, U.S. President Donald Trump announced new 10% tariffs worldwide as part of a comprehensive executive order he dubbed “Emancipation Day.”
The immediate impact of his announcement was severe, with stock markets suffering their worst decline since the pandemic. In the days that followed, countries scrambled to strike deals with Washington or retaliate with their own levies.
On February 20, the Supreme Court ruled that most of President Trump’s tariffs are illegal, noting that the president does not have the authority to impose broad, unlimited tariffs by claiming a national emergency.
What are the current status of global tariffs?
The Supreme Court’s decision was a major legal blow to the administration, but it did not end the trade war. Within hours of the ruling, the president invoked another law to impose temporary tariffs that are set to expire in July of this year.
The initial tariffs have now been lifted, but their effects are already reshaping the U.S. economy.
Between its implementation and the Supreme Court’s ruling, the average effective U.S. tariff rate rose from 2.6% to more than 13%, according to New York Fed economists.
This brought the effective tariff rate to the highest level since World War II, surpassing all trade barriers seen in the past 80 years.
How do tariffs work?
Tariffs are not a new tool. Nearly all U.S. governments have used them in targeted ways to protect certain industries, address unfair trade practices, or gain leverage in negotiations.
Basically, a tariff is a tax that a country’s government imposes on goods and services from a foreign country, making them more expensive to encourage domestic purchases.
The diagram below shows how tariffs work.
How much did the United States collect in tariff revenue?
President Trump promised that tariffs would reduce the trade deficit and make America richer, but in reality, the average American consumer is worse off, with households paying more than $1,000 more for the same groceries, clothing, and cars, according to the Tax Foundation.
According to the Penn Wharton budget model, the United States collected more than $287.1 billion in tariffs in 2025 and $64.4 billion by 2026.
Following the Supreme Court’s ruling, the government could be required to repay up to $175 billion to companies that paid, according to the Penn Wharton Budget Model.
Who is paying for it?
The Trump administration has consistently argued that tariffs are taxes on foreign countries and blocs, such as China and the European Union, and that the costs are borne by those countries.
Economists at the New York Fed found that nearly 90% of the economic burden of tariffs fell on U.S. businesses and consumers, with foreign exporters paying only a fraction of the cost.
A study conducted by the New York Fed found that about half of the companies targeted by the tariffs raised prices in response, passing the costs directly on to people who buy goods at higher prices at checkout.
According to the Tax Foundation, U.S. households paid $1,000 more in 2025 for the same items they were already buying. But the burden is not shared equally. Low-income households, which spend a high proportion of their income on necessities such as food, clothing and transportation, felt the squeeze the most.
In November, the Trump administration signed an executive order exempting more than 237 food imports from the tariff system. Coffee, beef, oranges, etc. were excluded from the list. This is a major shift in the administration’s trade policy, acknowledging what economists have been warning for months: Tariffs on everyday goods will hit Americans the hardest.
The Tax Foundation projects that if President Trump’s IEEPA tariffs are replaced with a flat 10% tariff, the average cost for U.S. households will drop to about $600. Although improvements have been made, it is still a significant cost that consumers are paying.
