'Not as high as announced': Top economists explain why Trump's tariffs didn't fully bite

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, states that statutory tariff rates on US imports have risen dramatically to levels that have not been seen in more than a hundred years. At the end of September 2025, the trade-weighted average tariff rate sat at 27 per cent. "Imports from 176 exporters, on goods accounting for more than 70 per cent of total US imports, faced higher tariffs than they did at the end of 2024."

However, according to the paper, the tariffs actually implemented were far lower. "As of the end of September 2025, the actual tariff rate was only about half as large as the statutory rate," the paper points out. "Shipment lags, product- and company-specific exemptions, utilisation of the United States-Mexico-Canada Agreement (USMCA), and evasion and heterogeneous enforcement all contribute to the large gap between statutory and actual rates."

A key reason why the price impact of the tariffs remains below many forecasts made in April is that the implemented policy remains much smaller than the announced policy, the economists noted in the paper, adding that shipment lags will dissipate over time, but the other contributors to the statutory-actual gap may persist or expand moving forward.

Gopinath served as the 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 from the research is that when tariffs are collected, their costs are largely shouldered by American importers and consumers, rather than foreign exporters.

Neiman and Gopinath find that tariff pass-through to US import prices is nearly complete - approximately 94 per cent in the recent episode and around 80 per cent in earlier 2018–19 episodes. This means that rather than foreign suppliers absorbing some of the duty, the price increases show up almost fully in the final cost borne by US businesses and buyers.

"The 2025 tariff shock is not yet as large as the policy announcements suggest, but its costs are largely borne by the United States, as exporters have, on average, not dropped their prices," the paper states.

In November last year, Sajjid Chinoy, Chief India Economist and Head of Asia Economics at JPMorgan, said that actual tariff implementation in the US had turned out to be far less potent than first feared. Speaking to Govindraj Ethiraj on The Core, Chinoy said the doomsday predictions made earlier in the year had not materialised because both the tariff rollout and the global economic backdrop shifted in unexpected ways.

Chinoy pointed to two main factors behind the stronger-than-expected global growth. The first was the actual tariff trajectory. "On liberation day, the US President said effective tariffs will be close to 26% which was a ginormous increase from the 3% in 2024. If you actually see what's happened several months later, the effective tariff is more like 17%," he said, noting that multiple exemptions - including electronics, semiconductors and pharmaceuticals - pulled down the real rise. "So, the effective tariff is about 10 percentage points lower."

He, however, said that this is the calculated tariff that economists calculate on a spreadsheet. "The actual tariff in the US today is about 10%. When you look at the revenues you collect from imports (tariff revenues) and you divide that by the number of imports, it's about 10%. So the move has been far less sharp. It's gone from 3 to 10, not from 3 to 25 or 3 to 17."