Despite raising tariffs to an 80-year high last year, the Trump administration’s International Emergency Economic Powers Act (IEEPA) duties had muted impacts on America’s overall economic standing. While they ballooned from an average of 2.4 percent to 9.6 percent over the course of 2025, certain key factors mitigated their impacts, according to a newly released study from the Brookings Institute.
Last year, tariff revenue exceeded $264 billion—more than triple what the federal government raked in in 2024. Analysts observed that the aggregate impact of the IEEPA duties on the U.S. economy stands somewhere in the range of 0.1 percent of GDP and -0.13 percent, even though President Donald Trump’s country-specific tariffs amounted to greater rate hikes than the 1930 Smoot-Hawley duties fingered by many economists for ushering in the Great Depression.
“That’s because federal revenue generated by the tariffs and gains to U.S. producers largely offset the tariffs paid by U.S. importers,” the paper’s authors, Pablo Fajgelbaum of the University of California, Los Angeles and Amit Khandelwal of Yale University wrote.
While the American economy wasn’t hit with seismic shocks, the tariffs did, as the authors mentioned, have an outsize impact on importers—hardly a surprise to industries dependent on offshore supply chains. Khandelwal and Fajgelbaum, both members of the National Bureau of Economic Research, estimated that around 90 percent of the duties were absorbed by importers, with foreign exporters absorbing just 10 percent of the heightened cost.
However unprecedented in their application, the tariffs were tempered by U.S. trade policy that actually rendered 57 percent of imports duty free, the analysts added. Most products entering the country from Canada and Mexico—which superseded China as the U.S.’ top trading partner three years ago—are covered by the United States-Mexico-Canada Agreement (USMCA), and therefore aren’t subject to added tariffs. Additionally, the impact of the duties may be less potent than observed by the public because the tariffs that were announced by the administration “exceeded the actual tariffs imposed at the border,” the paper asserted.
Notably, “with the exception of China, the majority of U.S. exports have not faced retaliatory tariffs,” the writers added. “Across trade partners, applied tariffs in December 2025 are strongly correlated with 2024 bilateral trade deficits (consistent with the formula used for the ‘Liberation Day’ tariffs), but much variation remains that seems uncorrelated with geopolitical or strategic industrial goals, other than targeting China.”
In that goal—targeting China—the strategy has succeeded. The authors said that data shows that the administration has achieved its objectives of boosting federal revenue and simultaneously decoupling from the sourcing superpower, which, for decades, was by far the biggest exporter to the U.S. That movement began nearly a decade ago with the first tranches of tariffs on China, imposed by Trump using Section 301 of the Trade Act of 1974, and “accelerated markedly in 2025.” In fact, China’s piece of the U.S. import pie shrank from 23 percent in December 2017 to just 7 percent in December 2025—a direct result of the tariffs imposed over the years, the authors noted.
The conscious uncoupling from China hasn’t led to a boost in “friend-shoring,” though. Historic allyship with the U.S. didn’t save countries and trade blocs like the European Union and the United Kingdom from facing Trump’s public ire and being hit with double-digit IEEPA duties, nor did it boost trade between the longtime partners. The authors found that the tariffs applied by the Trump administration were “seemingly unrelated to [trading partners’] pre-existing geopolitical alignment” with the United States and “tariffs on NATO and strong defense allies are only slightly lower than tariffs on the rest of the world.”
“It also remains to be seen whether the tariffs will reduce the trade deficit, lower before-tariff import prices, promote manufacturing jobs, or reshore key sectors,” the authors added. Last year, America’s trade deficit with the rest of the world increased slightly.
In spite of their demonstrably dubious power to advance strategic trade objectives, the authors “believe that tariffs will remain an active instrument of U.S. international policy” in 2026 and going forward. That opens up the possibility of widespread retaliatory duties against U.S. exports. If every country targeted by tariffs were to respond accordingly, the authors wrote that U.S. real income could fall by 0.34 percent.
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