Discredited, Discarded, and Demented: Donald Trump and His Tariffs

A week or so ago, Kevin Hassett, the director of the Trump administration’s National Economic Council, lost it when the host of the “Squawk Box,” the CNBC business news show, asked him to comment on a recent Federal Reserve Bank of New York paper. The paper found that U.S. importers paid almost all (94%) of the cost of Trump’s tariffs in the first eight months of 2025, not foreign exporters, as the president has claimed time and time again.  

That was too much for Hassett. He called the paper “an embarrassment ... the worst paper I've seen in the history of the Federal Reserve System.” And he demanded that the authors be “disciplined” for their “highly partisan” analysis “that wouldn't be accepted in a first-semester econ class.” 

The Fed paper was far from the only one to discredit the president’s claim that foreign exporters paid the cost of U.S. tariffs. In their 2024 paper, Peterson Institute for International Economics authors Kimberly Clausing and Mary Lovely put it this way: “In contrast to Trump’s frequent, and mistaken, claims that foreigners bear the impact of tariffs, economists have long understood that tariffs burden domestic purchasers of imported goods.” In addition, a 2025 policy brief from the Kiel Institute in Germany found that: “Foreign exporters absorb only about 4% of the tariff burden—the remaining 96% is passed through to US buyers.”

The Fed paper’s findings were also consistent with the assessment of the February 2026 Budget and Economic Outlook published by the Congressional Budget Office (CBO). The CBO estimated that foreign exporters will absorb 5% of the cost of the tariffs. They project that 30% of the remaining costs will be absorbed by U.S businesses reducing their profit margins and 70% by U.S. consumers paying higher prices.  

The “embarrassing truth” about Trump’s tariffs, as the Wall Street Journal put it, is that “Americans pay higher prices, or ‘pay’ in the form of less choice.” True enough. But in addition, his tariffs did next to nothing to reduce the U.S. trade deficit in goods and services, as Trump has promised. In 2025 the trade deficit stood at $901.5 billion, barely lower than the $903.5 billion trade deficit in 2024.

A Judicial Rebuke

Things only got worse from there for Trump and his toadies. On Friday (February 20) the Supreme Court declared Trump’s retaliatory tariffs, which were enacted using the International Emergency Economic Powers Act, to be unconstitutional. In their 6-3 decision the court ruled that, as taxes on imports, Trump’s tariffs had usurped Congress’s authority to enact taxes. Their decision struck down the majority of Trump’s tariffs, which had collected $142 billion in revenue in 2025, according to the estimates of the Yale Budget Lab. 

Not surprisingly, Trump had a conniption fit, demeaning himself as the Wall Street Journal editors observed. He attacked the six justices who had found his tariffs unconstitutional. He called the three liberal justices a “disgrace to our nation,” and the three conservative justices “fools” and “lapdogs.” 

Instead of using the Supreme Court’s decision as an opportunity to liberate himself from his biggest policy blunder, Trump doubled down on tariffs. He imposed a new 15% across-the-board tariff using Section 122 of the 1974 Trade Act that allows presidents to enact tariffs that expire after 150 days unless they are approved by Congress.

Here’s what we know about Trump’s reconfigured tariff policy. According to the Yale Budget Lab, the effective U.S. tariff rate (the average tariff rate on all imported goods) would decline from 16% before the ruling to 13.7%, which is still higher than any other year since 1939. The across-the-board 15% tariff rate will create winners and losers among the 20 largest importers to the United States. Global Trade Alert estimates that the tariff rates will fall for the countries that Trump had saddled with the highest tariffs, including Brazil (13.6 percentage points) and China (7.7 percentage points). The countries that had faced more moderate tariffs will see their tariff rates increase, including the United Kingdom (2.1 percentage points), and the European Union (0.8 percentage points).  

Then there is the question of what becomes of the $142 billion in tariff revenues generated by Trump’s unconstitutional tariffs. The Supreme Court had little to say on the matter, leaving it to the lower courts to litigate. It’s unclear if anyone will ever be compensated.  But surely those who bore the economic burden imposed by Trump’s illegal tariffs should be compensated. Ironically, if Trump truly believes that foreign producers who send their goods to the United States pay his tariffs, then his administration should compensate them. 

But back in the real world, where the great bulk of the cost of Trump’s tariffs was paid by U.S. importers and consumers, they are the ones who should be compensated. While U.S. importers hand over the money to pay the tariffs to the government, they pass as much as 70% of that cost on to consumers by raising their prices, according to the CBO, and 43%, according to the Harvard Business School Tariff Tracker. It is imperative that those consumers be compensated as well. Illinois Governor JB Pritzker, for one, has already sent the Trump administration an invoice demanding $8.6 billion in tariff refunds, to be used to send a $1,700 check to each household in his state.  

In any case, the uncertainty and chaos caused by Trump’s shape-shifting tariffs, propped up by a patchwork of institutional arrangements, have been the most injurious to the U.S. and global economy. The uncertainties are manifold. Will U.S. importers and consumers be compensated? Will Congress extend Trump’s across-the-board tariffs beyond five months? And what of Trump’s policies would survive a change in government in 2028?

This is hardly the stable foundation needed to encourage domestic investment, which is crucial to restoring job creation, let alone to lure foreign investors into the United States.  It’s no wonder that, despite Trump’s promise of a manufacturing renaissance, U.S. manufacturing has shed jobs every month since Trump’s early April Liberation Day announcement of his reciprocal tariffs, losing a total of 72,000 jobs by January of this year.   

The Supremes

The Supreme Court’s decision was a good first step toward putting a check on Trump’s destructive trade policies. But to paraphrase the other Supremes, the famed Motown singing group, those policies need to stop in the name of love and caring for the well-being of most all of us, not just here but across the globe.  

John Miller is a professor emeritus of economics at Wheaton College and a member of the Dollars & Sense collective.