When the Trump administration first rolled out sweeping tariffs on imports, many economists braced for an inflation spike and trade turmoil. Tariffs, after all, act as taxes on domestic importers rather than payments from foreign exporters. Someone had to absorb the cost—either businesses through slimmer margins or consumers through higher prices. The logic seemed clear: profits would tighten, prices would rise and the economy would cool.
Yet the expected wave of inflation never quite materialized. According to Harvard University’s Gita Gopinath and Brent Neiman of the University of Chicago, the reality was far more complex. In their joint analysis comparing the 2018–2019 tariffs with those imposed in 2025 under the second Trump administration, they found that the impact on U.S. trade and prices was shaped by multiple offsetting factors.
Their study examined three main explanations for the muted inflation effect. The first was that the real price impact depended heavily on how much of the tariff increase importers passed along. The second involved shifts in buying behavior, as U.S. firms and consumers steered away from goods facing the steepest price hikes and toward alternative suppliers, either domestic or foreign. The third was currency dynamics: a stronger dollar could dampen import price increases but reduce demand for American exports.
The researchers also found a major disconnect between the government’s stated tariff rates and those actually applied. Announcement delays, retaliatory tariffs, changes in trade negotiations and new sourcing patterns—including substitutions under the U.S.-Mexico-Canada Agreement—meant the real burden was often lower than headline figures suggested. The earlier 2018–2019 tariffs, mostly targeting Chinese goods, were narrower in scope and steadier over time, making them somewhat easier to quantify.
“The actual tariff rates on U.S. imports are not nearly as large as policy announcements suggest,” Gopinath and Neiman concluded, “but they are still historically large and reshaping U.S. trade patterns.”
Their analysis found high pass-through rates to import prices, a sharp drop in China’s share of U.S. imports and rising costs for domestic manufacturers.
While the broader economy has not yet borne the severe impact many predicted, the study leaves open several questions. Will the gap between statutory and effective tariffs persist? How much current trade reflects Chinese exports routed through third countries? And how will U.S. manufacturing and the weakening dollar influence future outcomes?
For businesses and investors—especially those in commercial real estate—the findings suggest a continued need for close observation and strategic adaptability as U.S. trade policy and global dynamics remain in flux.
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