The Congressional Budget Office has revised its estimates and states that the tariff increases implemented from January 6, 2025, to November 15, 2025, will reduce the primary deficit of the United States by $2.5 trillion over 11 years if they remain in place during the 2025–2035 period. Tariff revenues have risen to $90 billion between October and December 2025, compared with $20 billion in the same period in 2024. However, year-over-year inflation during that period is actually lower.

Inflation in the United States has not surged to 5–6%, as some investment banks had predicted following the tariff announcements. In fact, the year-over-year CPI, the PCE Index, and import prices reported by customs and border offices show no discernible increase in year-over-year inflation and are certainly very far away from the consensus estimates.

The year-over-year CPI in the U.S. stood at 2.7% in December, with a monthly increase of 0.3%, according to the latest data from the Bureau of Labor Statistics. The main drivers of inflation are housing and services, which have nothing to do with tariffs. Core inflation (CPI excluding food and energy) stood at 2.6% year-over-year in December, with a monthly advance of only 0.2%, the lowest level in about four years. Core inflation has stabilized around 2.6%, well below what was feared a few months ago, reinforcing the perception that underlying pressures are moderating even though services remain relatively “hot.”

The U.S. import price index rose 0.4% in the September–November 2025 period, with a 0.7% year-over-year increase for non-energy imports. Within imports, prices from China fell 3.6% year-over-year in November, while those from Japan rose 2.6% and those from the EU fell 0.1%. Customs import prices are falling, especially from countries facing higher tariffs.

Moreover, U.S. export prices increased 0.5% in the September–November 2025 period, especially in agricultural goods and motor vehicles.

According to the BLS, import prices rose only 0.1% in the twelve months ending in November, while export prices increased 3.3%. Since these figures exclude tariffs, they show that inflationary pressures are not coming from imported products nor tariffs.

If both import and export prices rise but import prices barely move, the effect of the tariffs is being absorbed throughout the supply chain, particularly in locations with the greatest excess capacity. In other words, exporters, distributors, transportation, and warehousing absorb most of the tariffs in the chain because the cost of working capital for elements of the chain with greater excess capacity makes passing tariffs on to the consumer unfeasible.

Despite this, you will read studies by Cavallo or the Kiel Institute that claim the opposite. Alberto Cavallo’s estimates use January 2024 as the cutoff for the pre-tariff trend calculation. However, after a brutal inflationary burst in 2021–2024, the last year appears artificially “disinflationary.” If one looks at the 2021–2024 series, the trend is of continued disinflation. The inflation trend in 2025 is lower than in the Biden years, even in the eighteen months that led to Fed easing and rate cuts.

The Federal Reserve Bank of Atlanta published that businesses anticipate their costs will rise just 2.0 percent over the next year, down from 2.2 percent in December, the lowest level in the post-pandemic era.

The Kiel Institute study “America’s own goal: Americans pay almost entirely for Trump’s tariffs” is statistically questionable for several technical and identification reasons. Economists like Stephen Moore and E.J. Antoni have pointed out some surprising assumptions, and John Carney wrote extensively about major statistical biases in “Debunking the myth that Americans are paying 96% of tariffs,” concluding, “It does not prove 96 percent of costs fall on Americans. It does not prove consumers pay higher prices. And it certainly doesn’t prove tariffs are an “own goal.”

The most surprising factor is that the Kiel Institute attributes almost the entire price movement trend in the United States to tariffs while ignoring that the same trend is similar or even larger in the United Kingdom, European Union countries like Spain, or Japan. If U.S. exporters raise prices up to three times faster for the same categories than those exporting to the United States, the explanatory factor of price moves in America is not tariffs and has much more to do with other factors, as well as the widespread deterioration in the purchasing power of currencies in the countries analyzed.

The key result behind the headline circulating in the media—that exporters absorb 4% and the U.S. absorbs 96% of tariffs—is based on a coefficient of approximately −0.039 with a standard error of 0.024, which is only significant at the 10% level, showing a very noisy estimate despite having 25.6 million observations, Carney explains. With that level of imprecision, the implicit confidence interval itself allows for exporter absorption between 0% and 9%, so presenting “4%” as a precise figure creates an illusion of accuracy that the data do not support. Furthermore, the study interprets the increase in average imported prices as evidence of tariff pass-through but ignores that total imports (value and volume) fall by 28%, with low-cost suppliers exiting the market. If cheap products disappear and only mid/high-end ones stay, the average price rises even though the reality shows that prices within each category have not increased, as reflected in customs and final consumer data. Thus, the change in the quality mix can be mistaken for a price increase “due to tariffs.”

Tariffs are applied at very disaggregated levels (HS8/HS10), but surprisingly the Kiel study works with data at the HS6 level, which is much more aggregated, according to Carney. This forces the use of an average tariff rate for products with very different actual tariffs or even no tariffs at all. That poor measurement of the tariff (as an explanatory variable) introduces an error that biases coefficients toward zero, making it easier to “find” a little price response and reinterpret it as proof that almost all the cost falls on the U.S. If the same analysis is done for non-energy products in the United Kingdom, Japan, Germany, Spain, or France, for example, it would appear that tariffs are being paid by Americans and all foreigners at the same time, which is obviously ludicrous. If both tariffed and non-tariffed goods show increases in unit values, the differential comparison is artificially reduced.

Even if the estimates on import prices were correct, the study assumes without evidence that 96% is passed on to consumers, without analyzing retail prices, business margins, or the distribution of incidence along the supply chain.

The claim that it is basically a “consumption tax” passed on 96% to Americans is presented as an empirical conclusion, when in reality it is a personal extrapolation without direct statistical backing, Carney concludes.

If the report’s conclusions—based on several surprising assumptions—were correct, then year-over-year inflation, core inflation, and the U.S. PCE Index would have more than doubled the published levels. The PCE Index would have more than doubled the published levels. The study assumes that all price increases are explained by tariffs, primarily by ignoring the upward trend in individual prices and baskets in exporting countries as irrelevant. If US export prices rise three times faster than import prices, and higher if analyzed category by category, it is clear that exporters to the US are not passing tariffs to final prices. When import prices from the EU fall, and China’s prices decline is so significant, it is also a signal of easing inflationary pressure, not the opposite.

Moreover, by ignoring the fact that the most “inflationary” categories in U.S. data are services, which are not subject to tariff pressure, the analysis reaches conclusions that are surprising and raise more doubts than certainties. The data shows that services, which are not affected by tariff pressure, are the most “inflationary” categories in the U.S., leading to conclusions that are surprising and create more doubts than certainties. Furthermore, we should see rising margins and lower prices among exporters selling to the U.S., but the opposite has occurred.

Even in the Kiel Institute report, they say that exporters largely kept pre‑tariff dollar prices, which is a reduction in constant dollar terms considering that the US dollar weakened in 2025 against exporter currencies. Furthermore, the study says that their per‑unit margins in the US did not rise and they accepted lower volumes and lost market share. If Americans have consumed more, as the data indicates, and prices have not gone up in constant dollars, while exporters have lost market share and their profits haven’t improved, the report is recognizing that price changes can’t be blamed on tariffs but rather on many other factors in a complicated trading situation.

Tariffs will remain a fascinating topic of debate for a long time, and studies are always valuable, but the evidence—almost a year later—is that the components of inflation data do not show slowing but persistent inflation (a phenomenon occurring in all comparable countries) to be caused by tariffs. With the level of excess capacity that exists in the global exporting system, it is clear that the supply chain absorbs tariff costs wherever pricing power is weakest.