Trump tariffs rake in big money, but who is paying?

US president Donald Trump has imposed tariffs on dozens of countries, including India, an unprecedented act in American history for its scale as well as severity. Trump said Thursday that sweeping tariffs he has imposed on nations around the world were making the country "great & rich again". Tariff revenues have witnessed a sudden spurt in recent months. Trump and his supporters have repeatedly advanced the argument that tariffs are forcing other countries to pay up. But it's not that simple. Technically, American companies which import goods from other countries pay the tariffs. In reality, tariffs are spread across the whole chain -- from exporters to American importers, distributors, retailers and consumers. In fact, often it's the Americans who end up paying greater part of tariffs that the US government earns.

Bump in US tariff revenue
US customs duty collections surged again in June as President Donald Trump's tariffs gained steam, topping $100 billion for the first time during a fiscal year and helping to produce a surprise $27 billion budget surplus for the month, as per a Reuters report citing the Treasury Department data. The budget data showed that tariffs are starting to build into a significant revenue contributor for the federal government, with customs duties in June hitting new records, quadrupling to $27.2 billion on a gross basis and $26.6 billion on a net basis after refunds.

For the first nine months of fiscal 2025, the customs take reached records of $113.3 billion on a gross basis and $108 billion on a net basis, nearly double the prior-year collections. The government's fiscal year ends on Sept. 30.

Based on those results, tariffs have now grown into the fourth-largest revenue source for the federal government, behind individual withheld receipts at $2.683 trillion for the fiscal year, non-withheld individual receipts at $965 billion and corporate taxes at $392 billion. In the space of roughly four months, tariffs as a share of federal revenue have more than doubled to around 5% from about 2% historically.

Treasury Secretary Scott Bessent had told a cabinet meeting that calendar-year 2025 collections could grow to $300 billion by the end of December. At the June run rate, gross customs collections would hit $276.5 billion in six months' time, which means reaching Bessent's target would require some increases. Ernie Tedeschi, economics director of the Budget Lab at Yale University, had told Reuters it may take more time for the tariff revenue to fully ramp up because businesses and consumers have sought to front run the duties by buying ahead.

The numbers are likely to reinforce Trump's view of tariffs as a lucrative revenue source and as a hammer to enforce non-trade foreign policy. He had said that "the big money" would start to flow in after he imposes higher "reciprocal" tariffs on US trading partners on August 1. Now that he has slapped dozens of countries with new tariffs which will be applicable from August 7, the question is who is paying for these tariffs.

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Who pays Trump's tariffs?
A tariff is essentially a tax imposed by a government on imported goods. The intended goals of tariffs can vary — from protecting domestic industries to generating revenue or exerting economic pressure on other countries. When the United States imposes a tariff, the tax is not charged to a foreign government or exporter directly. Instead, it is levied on goods as they enter the country, at the point of importation.

The party responsible for paying the tariff is the American company that imports the product. For example, if a U.S. electronics retailer imports computer components from China, the company pays the tariff when the goods arrive at a U.S. port. This payment is made to U.S. Customs and Border Protection and goes directly into the federal treasury. The foreign exporter has no legal obligation to pay this tax, nor is it charged at the point of export. This reality stands in direct contradiction to President Trump’s frequent assertion that China or other foreign countries are paying the tariffs.

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Although the importer is the one who pays the tariff upfront, the economic impact does not stop there. Tariffs act like a cost increase in the supply chain. American importers must decide how to absorb this new cost. In some cases, they may try to pressure foreign suppliers to lower their prices to offset the tariff, and occasionally, exporters will agree to partial discounts to maintain market access. However, this is not guaranteed and depends heavily on the competitiveness of the market and the elasticity of demand.

More often, the increased costs are passed downstream. Importers may raise prices for wholesalers and distributors, who in turn pass the costs along to retailers. Ultimately, it is American consumers who feel the impact in the form of higher prices on everyday goods — from clothing and electronics to household appliances and even groceries. Alternatively, companies may try to absorb the tariffs by accepting lower profit margins, cutting investments, or reducing wages and employment. A 2019 study conducted by economists at Columbia University, Princeton University, and the Federal Reserve Bank of New York found that American consumers and companies were paying nearly the full cost of Trump’s tariffs.

The more the United States imports from countries affected by tariffs, the more revenue the federal government collects — but it is US companies and consumers who are funding that revenue stream. The idea that foreign governments are directly transferring money to the US Treasury is not only inaccurate, it misrepresents how tariffs function in the global trading system.

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If Americans pay the tariffs, why are other countries scared?
Even if American importers technically pay all the tariff (though in many cases exporters have to pay it fully or partially), the foreign exporter feels the impact because tariffs make their products more expensive and less competitive in the US market. When a US buyer faces higher costs due to a tariff, they might buy less of that product, switch to a domestic alternative, or find a different foreign supplier not subject to tariffs. This means exporters in other countries might lose sales, market share and revenue. Over time, this can seriously hurt their industries, especially if they rely heavily on US demand.

Tariffs also inject instability into global supply chains. Exporters and manufacturers in other countries often operate on long-term contracts, with complex logistics and investment cycles. If the US, the world's largest consumer market, suddenly slaps a tariff on one of their key products, it creates uncertainty. This uncertainty can delay foreign companies' investment decisions and cause layoffs or shifts in production. It can push firms to relocate operations to tariff-free countries which costs time and money. Sudden tariffs can also undermine long-term business relationships of exporters with US companies.

In international trade, who pays a tariff and who suffers from it are not always the same. The strategic value of tariffs often lies in their indirect consequences, not just the customs duty collections at the border.

(With inputs from agencies)