New Research Finds Tariffs Fell Short Of Their Intended Shock

When the Trump administration first introduced broad tariffs on imported goods, economists widely anticipated a surge in inflation and disruption to global trade. Tariffs function much like taxes on U.S. importers, meaning the added costs would have to be absorbed either by businesses through reduced margins or by consumers through higher prices. Conventional wisdom suggested profits would be squeezed, prices would climb, and economic activity would slow.

That outcome, however, never fully materialized. According to a new analysis by Gita Gopinath of Harvard University and Brent Neiman of the University of Chicago, the real-world effects of tariffs were far more nuanced. Comparing the 2018–2019 tariff actions with those imposed in 2025 under the second Trump administration, the researchers found that multiple counterbalancing forces helped soften the expected inflationary blow.

Their study highlights three key dynamics. First, the actual impact on prices depended on how much of the tariff cost importers chose to pass along. Second, both businesses and consumers adjusted purchasing behavior, shifting away from goods with the steepest price increases and toward alternative suppliers, whether domestic or international. Third, currency movements played a role: a stronger dollar reduced import price pressures but also dampened demand for U.S. exports.

The researchers also uncovered a significant gap between announced tariff rates and those ultimately applied. Delays in implementation, retaliatory measures, ongoing trade negotiations, and changes in sourcing—particularly substitutions enabled by the U.S.-Mexico-Canada Agreement—meant the effective tariff burden was often lower than headline numbers implied. By contrast, the 2018–2019 tariffs, which primarily targeted Chinese imports, were narrower and more stable, making them easier to measure.

As Gopinath and Neiman noted, actual tariff rates on U.S. imports were “not nearly as large as policy announcements suggest,” though they remain historically high and are clearly reshaping trade flows. Their findings point to substantial pass-through into import prices, a pronounced decline in China’s share of U.S. imports, and higher input costs for domestic manufacturers.

While the broader economy has so far avoided the severe consequences many had predicted, the study raises important unanswered questions. Will the discrepancy between statutory and effective tariffs continue? To what extent are Chinese exports being rerouted through third countries? And how might domestic manufacturing trends and a weaker dollar influence future outcomes?

For businesses and investors—particularly those in commercial real estate—the takeaway is clear: U.S. trade policy continues to evolve, and staying agile amid shifting global dynamics will remain essential.