When Walmart told investors in its May 2026 earnings call that it could not absorb all incoming tariff costs and would have to raise prices on certain goods, the admission landed hard. The nation’s largest retailer was saying out loud what Bureau of Labor Statistics data had been showing for months: the cost of imported consumer products, from footwear to small electronics to packaged food, was climbing at a pace not seen in decades. The reason traces back to a single policy variable. The U.S. effective tariff rate hit roughly 17 percent in early 2026, a level the country has not seen since the protectionist era that followed the Smoot-Hawley Tariff Act of 1930.
Research from the Federal Reserve Bank of New York indicates that American buyers, not foreign exporters, absorb close to 90 percent of those added costs. For tens of millions of households already stretched by years of elevated inflation, that finding converts a trade-policy statistic into a direct hit on the family budget.
A tariff rate not seen in nearly a century
The Yale Budget Lab calculated the overall average effective tariff rate at 16 percent as of February 21, 2026, before the Supreme Court issued its ruling on the scope of presidential authority under the International Emergency Economic Powers Act. That 16 percent alone was the highest since 1936. Following the ruling, the administration moved to impose additional duties, and U.S. Customs and Border Protection revenue data suggest the effective rate has since pushed past 17 percent, though the precise figure depends on how exemptions and exclusion filings are counted.
The scale of the shift is hard to overstate. For most of the 2000s and 2010s, the effective tariff rate hovered between 1 and 3 percent. Even after the first rounds of China-specific tariffs in 2018 and 2019, it stayed below 3 percent. Jumping to 17 percent represents a structural break from the low-tariff consensus that shaped American trade policy for more than seven decades after World War II.
The Tax Policy Center has estimated that tariffs at roughly this level would cost the typical household between $1,900 and $2,600 per year in higher prices, depending on income and spending patterns. Lower-income families bear a disproportionate share because they spend a larger portion of their budgets on goods rather than services, a pattern that makes tariffs function much like a regressive sales tax.
Who actually pays: what the pass-through research shows
Economists have been able to study tariff incidence with unusual precision during this period because the policy changes were large, sudden, and well-documented at the product level. A landmark body of work led by Mary Amiti of the New York Fed, Stephen Redding of Princeton, and David Weinstein of Columbia found that pass-through of tariffs to U.S. import prices was nearly 100 percent during the 2018-2019 trade war. Foreign sellers, in other words, did not cut their prices to cushion American buyers. The full duty landed on U.S. importers and moved downstream from there.
The New York Fed’s Liberty Street Economics research team has continued tracking the pattern into the current tariff regime, using Census Bureau unit-price data at the ten-digit Harmonized Tariff Schedule level to monitor how prices move product by product and country by country. Their updated analyses support the conclusion that the 2018-2019 dynamic has held: foreign exporters are still not absorbing the new duties, and the cost flows downstream to American retailers and, ultimately, shoppers.
That body of evidence is the basis for the “nearly 90 percent” figure attributed to household burden. It reflects the combination of near-complete pass-through at the border and the reality that retailers, facing thin margins in competitive categories like apparel and consumer electronics, have limited room to absorb costs themselves. Some portion does get swallowed by importers and domestic manufacturers who use foreign components, which is why the share attributed to households falls slightly below 100 percent. But the overwhelming majority reaches the checkout counter.
Where the picture gets murkier
The 90 percent estimate, while grounded in rigorous empirical work, is not a single audited number pulled from a single study. It synthesizes border-level pass-through data with assumptions about how costs travel through domestic supply chains, warehousing, and retail markup structures. Reasonable economists disagree on the exact split.
Some models assign a larger share of the short-run burden to corporate profits, particularly in industries where firms have pricing power and can delay passing costs forward. Others point out that companies quickly re-optimize sourcing and pricing, pushing most of the pain onto consumers within a few quarters. The weight of peer-reviewed evidence favors a high household share, but treating 90 percent as a precise, settled figure overstates the certainty of the underlying research.
The jump from 16 to 17 percent also carries ambiguity. The Yale Budget Lab’s February 2026 report documents the pre-ruling rate in granular detail, but the tariff-line arithmetic behind the additional percentage point depends on subsequent duty schedules and enforcement actions that have not yet been consolidated into a single public source. Exemption utilization rates, which trade researchers flag as a meaningful variable, could narrow the realized effective rate in coming months if importers successfully file for exclusions or shift sourcing toward lower-duty countries.
CBP monthly collection totals confirm a sharp rise in tariff revenue, but they lack the granular country-by-product breakdown needed to separate the policy-driven increase from shifts in import volumes, commodity prices, and exchange rates. Without that decomposition, the precise contribution of the newest tariffs to the revenue surge remains an estimate, not an accounting identity.
The consumer squeeze and the corporate response
For households, the most immediate question is whether prices stabilize or keep climbing. If the 17 percent effective rate holds and no new rounds are announced, the adjustment may be largely priced in within a few more quarters as retailers finish renegotiating supplier contracts and resetting shelf prices. The University of Michigan’s consumer sentiment index, which fell sharply in early 2026, will be one barometer of whether shoppers feel the worst has passed.
Retailers are already adapting. Walmart, Target, and Home Depot have all flagged tariff-driven cost pressures in recent earnings calls. Sourcing shifts toward Vietnam, India, and Mexico have accelerated across the apparel, footwear, and electronics sectors. Those moves take time to bear fruit, however, and they carry their own costs: new supplier qualification processes, longer lead times, and in some cases lower initial product quality. Meanwhile, trading partners including the European Union and Canada have imposed or threatened retaliatory duties on U.S. exports, adding pressure on American manufacturers who sell abroad.
For policymakers, the data present a genuine tension. Tariff revenue has surged, providing a fiscal windfall that partially offsets other budget pressures. But that revenue comes directly from the pockets of domestic buyers, functioning as a consumption tax that hits lower-income families hardest. Whether that tradeoff is worthwhile depends on whether the tariffs achieve their stated goals of reshoring production and rebalancing trade deficits, outcomes that remain far from certain and that most economists say will take years to evaluate.
A burden measured in grocery receipts, not just percentages
What the numbers make clear is that the United States is operating under its heaviest import-tax burden in nearly a century. The academic debate has moved past the question of whether American households are paying for tariffs. The live questions now are how much, for how long, and whether anything the country gets in return, from factory jobs to leverage at the negotiating table, justifies what families are paying every time they walk out of a store.
