Impact of Tariffs on U.S. Consumers and Businesses

John Williams, President of the Federal Reserve Bank of New York, recently emphasized that the economic burden of tariffs imposed during President Donald Trump's administration has predominantly fallen on American consumers and businesses. Speaking at a conference in Washington, D.C., on March 3, 2026, Williams referenced a New York Fed analysis indicating that up to 90% of the costs associated with these tariffs have been absorbed domestically, contradicting claims from the Trump administration that foreign exporters would bear the financial impact.

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Williams noted that the tariffs have significantly increased U.S. prices for imported goods, contributing approximately 0.5 to 0.75 percentage points to the current inflation rate of around 3%. This inflation rate exceeds the Federal Reserve's target of 2%, and Williams stated that progress toward this goal has temporarily stalled due to the tariffs. He expressed optimism that the inflationary effects would be temporary, predicting a return to the target rate by 2027.

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Kansas City Fed President Jeff Schmid echoed Williams' concerns, highlighting that high inflation disproportionately affects low-wage workers. Schmid warned that the Fed must remain vigilant in maintaining its credibility regarding price stability, especially as inflation has persisted above the target for nearly five years.

Fed Officials Warn Tariffs Hurt Consumers, Raise Inflation Concerns

Williams defended the New York Fed's research against criticism from White House officials, including Kevin Hassett, who labeled the findings as "the worst paper I've ever seen in the history of the Federal Reserve system." Williams asserted that the research was thorough and consistent with other studies on the economic impact of tariffs. He stated, "The tariffs have overwhelmingly been borne domestically," reinforcing the notion that the costs have not been absorbed by exporters as previously claimed.

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The Trump administration's narrative regarding tariffs has faced significant pushback from Fed officials. Hassett's initial harsh criticism of the New York Fed's analysis was later softened, but it reflects the ongoing tension between the White House and the Federal Reserve regarding economic policy. Schmid's remarks about the severe impact of inflation on low-wage earners further illustrate the growing concern among Fed officials about the socio-economic implications of current inflation levels.

Fed Officials Warn Tariffs Hurt Consumers, Raise Inflation Concerns

Looking ahead, Williams indicated that if inflation decreases as the effects of tariffs diminish, further reductions in the federal funds rate may be warranted to prevent monetary policy from becoming overly restrictive. The Federal Open Market Committee (FOMC) is expected to consider these factors in its upcoming meetings, with traders anticipating potential rate cuts later in 2026.

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• “the tariffs have overwhelmingly been borne domestically.” — John Williams, President, Federal Reserve Bank of New York

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• “So far, we estimate that the tariff increases have contributed about 0.5 to 0.75 percentage points to the current inflation rate, which stands at around 3%.” — John Williams, President, Federal Reserve Bank of New York

New York Fed President: "Americans and U.S. Businesses Bear 90% of Tariff Burden"

• “Inflation affects, in a really severe way, the bottom half of our wage earners, and I want to stay really sensitive to that.” — Jeff Schmid, President, Federal Reserve Bank of Kansas City

Fed Officials Warn Tariffs Hurt Consumers, Raise Inflation Concerns

In summary, the ongoing debate surrounding the impact of tariffs on the U.S. economy highlights the complexities of balancing inflation control with the economic realities faced by consumers and businesses.

New York Fed's Williams: Tariffs have led to higher costs for US companies and consumers, contributing to rising inflation