Tariff Wars! What Are the Rates? Who Pays? What’s Next?

Why It Matters

Accurate tariff measurement reshapes inflation forecasts and informs firms’ supply‑chain strategies, highlighting the real cost of trade policy beyond headline rates.

Key Takeaways

• US statutory tariff rate peaked around 28% in early 2025.
• Effective average tariff paid by importers fell to roughly 13%.
• Shipping lags cause temporary gaps between announced and actual tariff rates.
• Firms increased USMCA compliance to avoid higher tariffs after hikes.
• Fixed 2024 import weight methodology masks impact of large sectoral tariffs.

Summary

The event featured Brent Nyman, a former Treasury deputy under‑secretary, presenting his latest research on U.S. import tariffs. He explained how statutory tariff rates—those set by law—jumped from near‑zero to about 28% after the 2024‑25 Trump‑era announcements, while the effective rate actually paid by importers settled around 13% by November 2025.

Nyman’s analysis distinguishes between the headline statutory rate and the realized average rate by examining the highest tariff observed across shipments and then weighting actual tariff payments by 2024 import values. He attributes the persistent gap to three forces: shipping‑lag exemptions that grandfather existing rates for goods already at sea, rapid shifts in USMCA compliance that allowed firms to claim tariff‑free status, and the use of fixed 2024 weights that obscure the economic impact of sector‑specific surcharges such as the near‑100% duty on Chinese electric vehicles.

Illustrative examples include the “on‑the‑water” rule, where a UK shipment en route in April still paid pre‑increase tariffs, and long‑haul Pacific routes that took three months to reflect new rates. He also highlighted a sharp post‑tariff increase in the proportion of shipments flagged as USMCA‑eligible, underscoring firms’ willingness to absorb compliance costs when tariffs rise.

The findings suggest that inflation forecasts based on statutory rates may double‑count tariff effects, and that policymakers need finer‑grained metrics to assess trade policy outcomes. Companies should monitor shipping timelines and trade‑agreement eligibility to mitigate unexpected cost spikes, while analysts must adjust models to reflect effective, not just statutory, tariff burdens.

Original Description

In September 2025, statutory tariff rates on US imports rose to 27 percent, a level not seen in over a hundred years. But shipping lags, exemptions, and enforcement gaps have kept actual tariff rates at only half the announced levels. And so far, exporters haven’t dropped their prices, so American consumers and businesses are paying for them. In this talk, Professor Brent Neiman discussed his latest research on the 2018-2019 and 2025 tariffs, including how they affect domestic manufacturing costs, and what’s been happening to the dollar.

Before returning to Chicago Booth in 2025, Professor Neiman served in the Biden administration as the Deputy Undersecretary of Treasury for International Finance. In addition to discussing his latest research, he’ll take questions on his experiences in public policy and international economic diplomacy.

🔗 Related Links

For more on the event, visit: https://bfi.uchicago.edu/events/event/bfi-student-lunch-series-tariff-wars-what-are-the-rates-who-pays-whats-next/

Pie Podcast Episode: https://bfi.uchicago.edu/insights/who-really-paid-tariffs-brent-neiman-on-liberation-day/

Research Brief: https://bfi.uchicago.edu/insights/the-incidence-of-tariffs-rates-and-reality/