‘Not as high as advertised’: Top economists explain why Trump’s tariffs were not fully effective

Despite headline-grabbing tariff announcements under US President Donald Trump’s administration, the actual impact on prices, trade flows and domestic industry has been more muted than widely feared, according to a new working paper by economists Gita Gopinath and Brent Neiman.

The paper, The Incidence of Tariffs: Rates and Reality, indicates that statutory tariff rates on U.S. imports have increased dramatically to levels not seen in more than a hundred years. At the end of September 2025, the trade-weighted average tariff rate stood at 27 percent. “Imports from 176 exporters, on goods representing more than 70 percent of total U.S. imports, faced higher tariffs than at the end of 2024.”

However, according to the newspaper, the rates actually applied were much lower. “At the end of September 2025, the actual duty rate was only around half of the legal rate,” the newspaper points out. “Shipping delays, product- and company-specific exemptions, reliance on the United States-Mexico-Canada Agreement (USMCA), as well as evasion and patchy enforcement, all contribute to the significant gap between statutory and actual rates. »

A key reason why the price impact of tariffs remains lower than many forecasts made in April is that implemented policy remains far below announced policy, economists note in the paper, adding that delivery delays will dissipate over time, but other contributors to the statutory-actual gap could persist or widen in the future.

Gopinath served as first deputy managing director of the International Monetary Fund from January 2022 to August 2025, while Neiman is a professor at the University of Chicago.

A second key finding of the study is that when tariffs are collected, their costs are largely borne by U.S. importers and consumers, rather than foreign exporters.

Neiman and Gopinath find that the pass-through of tariffs to U.S. import prices is almost complete – about 94% in the recent episode and about 80% in previous episodes in 2018-2019. This means that instead of foreign suppliers absorbing some of the tariffs, price increases pass almost entirely into the final cost borne by American businesses and buyers.

“The 2025 tariff shock is not yet as big as policy announcements suggest, but its costs are largely borne by the United States because exporters have, on average, not lowered their prices,” the paper said.

In November last year, Sajjid Chinoy, chief India economist and head of Asian economics at JPMorgan, said the actual implementation of tariffs in the United States had proven far less effective than initially feared. Speaking to Govindraj Ethiraj on The Core, Chinoy said doomsday predictions made earlier in the year failed to materialize because the implementation of tariffs and the global economic backdrop changed unexpectedly.

Chinoy highlighted two main factors behind the stronger-than-expected global growth. The first was the actual pricing trajectory. “On Liberation Day, the US president said that effective tariffs would be close to 26%, which was a huge increase from 3% in 2024. If you actually see what happened several months later, effective tariffs are more like 17%,” he said, noting that multiple exemptions – notably in electronics, semiconductors and pharmaceuticals – have reduced the actual increase. “So the effective rate is about 10 percentage points lower.”

He said, however, that this was the rate calculated by economists on a spreadsheet. “The actual tariffs in the United States today are about 10%. When you look at the revenue you collect from imports (tariff revenue) and divide it by the number of imports, it’s about 10%. So it’s been a lot less abrupt. It’s gone from 3 to 10, not from 3 to 25 or 3 to 17.”