Interactive infographic
How Tariffs Affect Prices: Who Really Pays?
Move the sliders to follow a tariff from the port to the store shelf, see who pays it and how much reaches shoppers, and why markups can make it bigger.
What this infographic shows
A tariff is paid at the border, but the cost travels down the supply chain. The importing company pays the tariff to U.S. Customs. It then decides how much to absorb as lower profit and how much to add to the price it charges stores. Stores add their own markup and sell to you.
The four steps follow one product from abroad to the shelf. The bar below them shows how much of the tariff is passed on in prices (coral) and how much businesses absorb (light coral).
How to use it
- Set what the importer pays for the product abroad and the tariff rate.
- Set how much of the tariff is passed on. Research on recent U.S. tariffs suggests a large share is.
- Raise the store markup and watch the extra cost to shoppers grow beyond the tariff itself.
Why it matters
Studies reviewed by the Peterson Institute find that recent tariffs have added to U.S. inflation. See how inflation shrinks what money buys, and how the Federal Reserve responds to inflation with interest rates.
This is a simplified model. Real supply chains have more steps, and some prices change for other reasons at the same time.
Frequently asked questions
Who pays a tariff?
Legally, the U.S. importer pays it when the goods enter the country. Economically, the cost is shared between the importer, the foreign seller and shoppers, depending on how much each can push onto the others.
Do tariffs raise prices for consumers?
Usually, yes. Studies of recent U.S. tariffs find that importers pass a large share of the cost on to the prices people pay, though how much and how fast varies by product.
Why can a tariff raise prices by more than the tariff itself?
Because many stores set prices as a percentage markup on what they pay. If the tariff raises the store's cost, the markup in dollars grows too.
Can a foreign company absorb a tariff?
It can cut its price to keep sales, which takes on part of the cost. Research on recent U.S. tariffs finds foreign sellers have absorbed only a small share.
Sources
Text version of this infographic
Who pays a tariff?
A tariff is a tax the importing company pays when goods cross the border. Follow one product to the shelf.
Price the importer pays abroad
Tariff rate
Share of the tariff passed on
The rest is absorbed by the importer or the foreign seller.
Store markup
Added on top of what the store pays.
Shelf price before
Shelf price after
Shopper pays extra
1 Importer buys the product abroad
2 Importer pays the tariff to U.S. Customs
3 Part of the tariff is added to the price the store pays
4 Store adds its markup and sells to you
Tariff passed on in prices
Tariff absorbed by businesses