New research shows how little we understand about how tariffs are rippling through the economy — and sheds light on how they may affect the landscape in 2026.
Why it matters: The tariffs caused historic uncertainty for businesses in 2025, but with more muted overall economic effects than many forecasters predicted.
- One reason: The effective rate paid by importers turned out to be lower than advertised, per a paper out this week.
- A second paper argues that tariffs historically have reduced inflation in the medium term, as their impact on prices is short-lived, but they cause more lasting economic damage.
By the numbers: The actual tariff rate is roughly half what the White House policies would suggest, according to the working paper from former top International Monetary Fund official Gita Gopinath and former Treasury official Brent Neiman.
- The authors calculated that the tariff rate, as suggested by White House policy announcements, is roughly 27% as of September, which "far exceeds the scale of the true trade policy shock," they wrote.
- But the actual rate, which the authors compiled using government data on tariff revenues and imports, is 14% — a rate the authors said rose "far more slowly and modestly" and "did not experience a reversal or the volatility seen in the statutory rate."
What they're saying: "It would make sense that if the actual shock is only half as large as you expected, then the price impact should be about half as large as you might have expected," Neiman tells Axios.
Zoom in: The authors say the gap — one that far exceeds that seen during Trump 1.0, which was roughly 1 percentage point by 2021 — is largely due to four factors:
- Shipment lags: Imports are not subject to the higher tariff rates announced while they are in transit.
- Exemptions result in lower tariff rates for key goods like semiconductors and other electronics carved out by the Trump administration.
- The U.S.-Mexico-Canada trade agreement: Compliance with the agreement has skyrocketed, meaning that goods imported from Canada and Mexico largely do not face the high tariffs imposed by the administration.
- Enforcement and evasion can result in a lower actual rate.
The intrigue: "When we asked ourselves, 'Do we expect that gap to close?' there are forces in both directions — but it's certainly possible that the answer is 'no' or 'not for a long time,'" Neiman says.
- "It's very possible that the contribution from additional exemptions or carve-outs might even cause this gap to expand."
What to watch: The authors found that "the 2025 tariff shock is not yet as large as the policy announcements suggest, but its costs are largely borne by the United States, as exporters have, on average, not dropped their prices."
Separately, the San Francisco Federal Reserve's research found that historically tariffs have not been inflationary, at least in the medium term.
The big picture: Yes, higher tariffs amount to a tax on imports that may be partially or fully passed on in the form of higher prices. But it also creates a shock that means lower demand and higher unemployment, which creates counteracting downward pressure on prices.
- "[O]ur analysis of historical data highlights a possibility that the large tariff increase of 2025 could put upward pressure on unemployment while putting downward pressure on inflation," economists Regis Barnichon and Aayush Singh wrote.
- "[L]arge and abrupt tariff increases before World War II were associated with lower inflation and higher unemployment, potentially spurred by higher uncertainty and lower wealth."
Yes, but: The authors caveat their findings that there is no historical instance that can truly compare to the economic circumstances of today:
- "[T]he share of imported inputs in production is higher today than in the past, which means a tariff shock may be more likely to raise inflation," they note.
