#economics + #tariffs

Ford said the US car maker's tariff costs were $900m (£660m) higher than expected last year because of a last minute change to the Trump administration's tariff relief program.

Chief executive Jim Farley said Ford spent double what it had expected on tariffs in 2025 - roughly $2bn - due to "the unexpected and late year change in tariff credits for auto parts".

Separately, Ford had previously disclosed a $19.5bn hit as a result of its shift away from electric vehicle plans. Those charges also contributed to its fourth-quarter net loss of $11.1bn. The vehicle manufacturer had said it was backing away from plans to make large EVs, citing lacklustre demand and recent regulatory changes under Trump. The business case for leaning heavily into EV production, specifically large-sized EV models, has "eroded", the company had said.

In research released Thursday by the Federal Reserve Bank of New York, a group of analysts and economists found that in 2025, the average tariff rate on imported goods rose to 13% from just 2.6% at the start of the year. The New York Fed found that 90% of the cost of increased tariffs, which Trump imposed on goods from Mexico, China, Canada and the European Union, was paid for by companies and often passed on to shoppers. "US firms and consumers continue to bear the bulk of the economic burden of the high tariffs imposed in 2025."

The reaction from exporters in 2025 was essentially the same in 2018, when Trump imposed certain tariffs during his first term in office – the cost of goods for consumers rose, with little other economic impact recorded, the New York Fed said at the time.

The Kiel Institute for the World Economy, an independent research firm in Germany, said in a report last month that it had found "near-complete pass-through of tariffs to US import prices." Kiel researchers analysed 25 million transactions and found that in exporting countries like Brazil and India, the price of goods from those countries did not decline. "Trade volumes collapsed instead," the Kiel report said, meaning exporters preferred to cut the amount of goods being shipped into the US rather than lower prices.

The National Bureau of Economic Research also found that the pass-through of tariffs was "almost 100%", meaning the US is paying for the increase in prices, not exporting countries.

Similarly, the Tax Foundation, a Washington DC-based think tank focused on US tax policy, found that increased tariffs on goods in 2025 increased costs for every American household. Defining tariffs as a new tax on consumers, the Tax Foundation said the 2025 increases cost the average household $1,000 (£734.30). In 2026, tariffs will cost the same household $1,300. The Tax Foundation said even the "effective" tariff rate, an average rate that takes into account people buying fewer goods in response to increased prices, is now 9.9%, making it the "the highest average rate since 1946". With such impacts on people, the Tax Foundation said any economic benefits of tax cuts included in Trump's "Big Beautiful Bill" will be offset entirely.

Trump said at the roundtable, adding "this money would not be possible without tariffs."

Another way to spend the money that’s already been spent many times over.

Research by Harvard Business School Professor Alberto Cavallo illustrates the downward trend in the price levels for many retail goods, followed by an acceleration after tariff announcements. Prices on both imported and domestic goods have climbed modestly but steadily since March, even if the hike is still small relative to the size of the tariffs.

The researchers created indexes with daily prices collected by PriceStats, a private firm cofounded by Cavallo that provides online data for over 350,000 products sold by five major US retailers. The indexes allow them to track price changes in specific categories and from countries of origin. Overall, the prices of imported products have increased faster than those made in the US. An extended analysis, going back to January 2024, explores price changes of goods relative to their pre-tariff trend.

Current Tariff Rate: Consumers face an overall average effective tariff rate of 17.9%, the highest since 1934. After consumption shifts, the average tariff rate will be 17.4%. (If IEEPA tariffs are invalidated, the rate would be 9.1%.)

Overall Price Level & Distributional Effects: TBL assumes the Federal Reserve “looks through” the tariffs and allows prices to rise such that the tax burden is felt through prices rather than nominal incomes. The price level rises by 1.3% in the short run, representing a loss of $1,800 for the average household and $1,000 for households at the bottom of the income distribution. (Without IEEPA, the price level impact would instead be 0.6%.)