New York Fed's Williams: Tariffs have led to higher costs for US companies and consumers, contributing to rising inflation

Impact of Trump-Era Tariffs on U.S. Consumers and Businesses

John Williams, President of the New York Federal Reserve, stated on Tuesday that the majority of the costs from tariffs imposed during President Trump's administration have been shouldered by American consumers and companies. He also noted that the complete consequences of these tariffs have yet to be fully realized.

Williams' remarks followed the release of a recent New York Fed analysis, which found that in the first eight months of 2025, 94% of tariff expenses were absorbed domestically, while only 6% were taken on by foreign exporters.

The Trump administration strongly criticized the findings, with Kevin Hassett, Director of the National Economic Council, labeling the report as "an embarrassment" and "the worst paper I've ever seen in the history of the Federal Reserve System."

According to Williams, the tariffs have contributed to an increase in inflation, raising it by approximately half to three-quarters of a percentage point so far. As of December, inflation measured by the Fed’s preferred metric stood at 3%, which is a full percentage point above the central bank’s 2% target.

“Due to the influence of tariffs, our progress toward reaching our inflation goal has temporarily stalled,” Williams explained.

Despite this setback, Williams observed that there is no evidence of significant secondary effects from the tariffs, nor have there been any major disruptions in global supply chains.

Williams also mentioned that core inflation, which excludes imported goods, has been trending positively. However, he anticipates that some of the tariff costs will continue to be passed on to consumers during the first half of this year.

“I believe the impact of tariffs on prices will be mostly temporary,” Williams said. “As the peak effects subside, I expect inflation to begin declining later this year.”

John Williams, President of the New York Federal Reserve, has emphasized that U.S. consumers and businesses have borne most of the costs from Trump-era tariffs, with the full impact still unfolding. (Photo: Saul Loeb/AFP via Getty Images)

Recently, the Supreme Court invalidated a significant portion of tariffs enacted by President Trump under emergency economic powers, raising questions about whether businesses will be reimbursed for tariffs paid under those now-overturned measures. In response, the administration has introduced a new global 10% tariff, with additional tariffs expected under other legal authorities.

Williams also commented that the labor market appears to have stabilized, and he is optimistic that economic growth will strengthen in the coming year.