The tariffs at the heart of this week's Supreme Court case are raising tens of billions of dollars for the federal government. They're also costing consumers, frustrating businesses and hurting the manufacturers they're supposed to help.
The average tax on U.S. imports today is nearly 18%, according to economists at the Budget Lab at Yale — up from 2.4% before Trump returned to the White House. The Treasury Department is collecting almost four times as much tariff revenue now as it was a year ago. The average tariff rate would be closer to 9% were it nor for the "emergency tariffs" the Supreme Court is reviewing.
Despite the administration's repeated claims that foreign suppliers are paying the tariffs, most of the bill is being paid by U.S. importers. And ultimately, at least some of the tab will be passed along to American consumers in the form of higher prices.
"It's a tax," says Patrick Allen, a wine importer based in Columbus, Ohio. "And it get built into the price everybody is paying for goods."
Inflation is rising
Tariffs have already contributed to higher prices for apparel, furniture and other goods where the U.S. is heavily reliant on imports. Inflation has been inching up in recent months, although it's still nowhere near the 9% level it reached three years ago, in the wake of the pandemic and Russia's invasion of Ukraine. Annual inflation in September was 3%, compared to 2.3% in April when Trump first announced his worldwide tariffs.
Inflation watchdogs at the Federal Reserve are betting that Trump's tariffs will raise prices once, as they work their way through the supply chain, but will not continue to cause upward price pressure month after month.
'Havoc' for importers
Wild swings in tariff rates — from 30% to over 100% — have also created challenges for importers who typically order products months ahead of time.
"The unpredictability of the tariff situation continues to cause havoc and uncertainty," said an anonymous computer manufacturer, quoted in a report this week from the Institute for Supply Management.
But even then, the manufacturer noted it wasn't spurring more domestic production.
"Even with the tariffs, the cost to import in many cases is still more attractive than sourcing within the U.S," said the manufacturer.
While the tariffs are designed to encourage domestic manufacturing by making imports more expensive, factory employment has dropped by more than 40,000 jobs since April, while the ISM index of manufacturing activity fell in October for the eighth month in a row.
"The products we import are not readily manufactured in the U.S., so attempts to reshore have been unsuccessful," said the manager of a machinery factory. "Overall, prices on all products have gone up, some significantly. We are trying to keep up with the wild fluctuations and pass along what costs we can to our customers."
Supreme Court challenge
Trump's emergency tariffs have been challenged by a number of businesses and states as exceeding the president's authority. The White House has relied for many of the tariffs on a 1970s statute designed to address economic emergencies. That law never mentions the word "tariff," and lower courts have found that using the law to impose taxes on virtually everything the U.S. imports goes too far.
The administration has warned of dire consequences if the tariffs are struck down by the high court.
"With tariffs, we are a rich nation; without tariffs, we are a poor nation," the administration said its Supreme Court brief. "America could go from strength to failure the moment such an incorrect decision took effect."
In fact, tariffs accounted for just 6% of total government revenue in September — the most recent month for which figures are available. And the jump in tariff revenue that month was more than offset by a decline in corporate tax payments.
The president's Plan B
Even if the Supreme Court does find the president's emergency tariffs are illegal, Trump has other options to impose import taxes, using powers that were explicitly granted by Congress.
"I think in the end, he could piece together something very close to — if not identical to — what he's done so far," says law professor Kathleen Claussen, a tariff expert at Georgetown University. "That's not to say we might not have legal challenges in the courts again. But certainly, on the surface, I think the president could move to replicate what he's already done using these other statutes."
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