What Americans now pay in tariffs

Under the new Section 301 regime, the average tariff paid on goods entering America has settled into two tiers, according to a detailed review of federal trade policy. Households and businesses now pay duties on almost everything they import, and the arrangement looks set to last.

Ten per cent or 12.5

Models that break down the current import schedules show about sixty trading economies paying a baseline tariff of 10 per cent, provided they have signed preliminary bilateral agreements on regulatory review. Countries that have not cooperated, including important manufacturing suppliers in Asia and Latin America, pay 12.5 per cent, with no product exemptions at all. Only a small group of specialised, life-saving cancer drugs escapes federal duties.

The gap between the tiers looks small but matters at the margin. A difference of 2.5 percentage points can decide which supplier wins an order in low-margin goods such as clothing, furniture and consumer electronics, where importers already shop across countries for fractions of a point. The design rewards signing an agreement, and it will tend to divert orders towards the signatories rather than bring production back to America.

How the duty reaches the till

The legal incidence is simple. The American importer of record pays the duty to Customs and Border Protection when goods clear the border, then decides how much to pass on to wholesalers, retailers and shoppers. Studies of the tariffs imposed on Chinese goods in 2018 and 2019 found that the cost fell almost entirely on American importers and their customers rather than on foreign exporters. There is little reason to expect a different result when the duty applies to nearly every supplier at once, because buyers have no untaxed source to switch to.

The 2018 and 2019 duties on Chinese goods offer a guide to where orders go. Imports from China fell, but much of the gap was filled by shipments from Vietnam, Mexico and other countries outside the tariff net, and some of those goods were Chinese components assembled or merely relabelled along the way. A two-tier schedule invites the same response on a wider scale. Suppliers in the 12.5 per cent tier have an incentive to route goods through signatories in the 10 per cent tier, which puts the burden on customs officers to police rules of origin across thousands of product lines.

The bill for households

For ordinary American families, the two tiers add up to an estimated deadweight cost of $1,800 to $2,400 a year in higher prices for shoes, household appliances, electronics and car repairs. The burden is regressive. Poorer households spend a larger share of their income on goods and less on services that never cross a border, so a flat duty on imports takes a bigger bite from them than from the well-off. Small online orders offer no escape either, since the de minimis exemption that once let low-value parcels enter duty-free was withdrawn in 2025, and cheap goods bought directly from overseas sellers now carry the duty too.

The winners are domestic producers of goods that compete with imports, such as steel, appliances and furniture, along with the Treasury's customs receipts. The losers are retailers with thin margins, manufacturers that rely on imported parts, and exporters in the higher tier who must cut prices to keep American customers. Makers of the exempted cancer drugs escape, but most other pharmaceutical supply chains do not.

Built to last

Once in place, the regime needs no further vote in Congress to continue, and its receipts flow to the Treasury every month, which makes it tempting for a government running large deficits to keep. Its legal footing also looks firmer than that of tariffs resting on emergency powers. Duties imposed that way in 2025 were ruled unlawful by the Court of International Trade and then by an appeals court that same year, whereas Section 301 of the Trade Act of 1974 was written expressly to let the executive respond to unfair foreign trade practices.

America has lived with a broad tariff wall before. The Smoot-Hawley act of 1930 raised duties on thousands of goods, drew retaliation from trading partners and helped shrink world trade during the Depression, and it took decades of negotiated cuts, beginning with the reciprocal trade legislation of 1934, to undo. The lesson that matters here concerns persistence: once revenue and protected industries come to depend on a tariff, dismantling it takes years.

Retaliation is the other cost the design invites. Trading partners in the higher tier can answer with duties on American farm goods, aircraft or machinery, as China did against soybeans in 2018, and farmers then need federal support to cover lost sales, as they received through special payments from the Agriculture Department in 2018 and 2019. Part of the customs revenue is recycled into those payments.

What could undo it

The case against permanence is real. A future administration could lower the rates by executive action, a stronger dollar would offset part of the cost for importers, and foreign exporters facing lost sales may shave their prices. The range for households is itself an estimate that depends on how much of the duty firms pass on. None of that changes the direction, because with nearly every import taxed, substitution offers little escape and the cost lands mostly at home.

The indicators to follow are core goods prices in the monthly consumer-price report, customs receipts in the Treasury's monthly statement and the list of countries moving from the higher tier to the lower one. The tariffs now work as a permanent federal consumption tax, and until Congress or the courts intervene, the typical family will probably keep paying $1,800 to $2,400 a year to help cover Washington's borrowing.