It’s been a wild ride since "Liberation Day" back in April 2025. You remember that week. Headlines were screaming, the stock market was twitching, and suddenly every small business owner in America was looking up the Harmonized Tariff Schedule like it was a summer blockbuster.
Now that we’re sitting in early 2026, the dust has settled—sorta. But the big question remains: Are Trumps tariffs working?
The answer is messy. It depends entirely on who you ask and which part of the receipts you’re looking at. If you talk to the White House, they’ll point to the fact that headline inflation has cooled to 2.4% and blue-collar wages are up. If you talk to a logistics manager at Ford or a small-scale importer of Italian pasta, they’ll show you a very different, much more expensive ledger.
The Revenue Reality Check
Let’s talk numbers. Real ones. According to the Tax Foundation, the federal government raked in about $264 billion in customs duties during the 2025 calendar year. That’s not pocket change. It’s a massive influx of cash into the Treasury.
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But here’s the kicker: the "average effective tariff rate"—which is basically the actual tax paid on every dollar of goods coming in—jumped from a tiny 2% in 2024 to nearly 11% by late 2025. Some estimates from the Yale Budget Lab even put it higher, hitting levels we haven't seen since the 1930s.
Is that "working"? Well, if the goal was to fill the government’s coffers and reduce the deficit, then yeah, it’s working. But that money doesn't just appear out of thin air. It’s paid by the companies bringing goods across the border.
What’s Happening at the Checkout Counter?
You’ve probably noticed your grocery bill didn't exactly plummet. While the administration argues that they’ve defeated the "inflation crisis," the USDA’s Food Price Outlook shows that food-at-home prices still rose by about 2.4% in 2025.
Harvard economist Alberto Cavallo has been tracking this closely. His research found that by the end of 2025, retail prices for imported goods had climbed about 5.4% above their pre-tariff trends. Domestic goods aren't immune either; they rose about 3% as local producers realized they could hike prices and still stay competitive with the now-pricier imports.
Basically, the "pass-through" is real. Businesses like John Deere and Lockheed Martin have reported hundreds of millions in additional costs. At first, many companies ate those costs to keep customers happy. But as we move into 2026, those inventories are dry. The "sticker shock" is finally hitting the shelves in full force.
The Winners and the Room for Nuance
It’s not all doom and gloom for every sector. There is actually some evidence of a "onshoring" spark.
- Manufacturing Output: US manufacturing output actually expanded by about 2.7% in some segments.
- Investment: Some firms have doubled down on U.S. production to dodge the tariff wall entirely.
- Exemptions: This is the part nobody talks about. Nearly 46% of U.S. imports ended up being exempted. Canada and Mexico secured lower rates for essentials like fertilizer and energy because, honestly, the administration didn't want to crush American farmers.
The Looming Shadow of the Supreme Court
If you want to know if these tariffs will keep "working," you have to look at the legal drama. Right now, the Supreme Court is weighing in on whether the President actually has the power to use the International Emergency Economic Powers Act (IEEPA) to levy taxes this way.
It’s a huge deal. If the Court rules against the administration, the government might have to refund billions. That would be a chaotic mess for the 2026 budget. Markets are currently holding their breath, waiting for a decision that could drop any day now.
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The "Real World" Verdict
So, are they working?
If the goal was to use trade as a hammer to force partners like Mexico and China to the negotiating table, there's been some success. We’ve seen a dozen joint framework agreements signed in the last year. But the cost of that leverage is being paid at the register.
Economists at the Peterson Institute warn that if these stay in place, we’re looking at slower growth and lower employment over the next decade. We’re already seeing some manufacturers in regions like Boston and Philadelphia start to trim their workforces to offset the cost of parts and raw materials.
Actionable Insights for 2026
If you’re running a business or just trying to manage your household budget in this "high-tariff" era, you can’t just wait for things to go back to "normal."
- Audit Your Supply Chain: If you’re a business owner, you need to know exactly which of your components are hitting the 25% or 50% brackets. "Washing" products through third countries isn't working like it used to—the feds have caught on to trade rerouting.
- Lock in Pricing Now: For consumers, if you're eyeing a big-ticket item like a new car or major appliances, the "inventory cushion" is gone. Prices in 2026 are expected to be more volatile than in 2025 as companies stop absorbing the costs and pass them on.
- Watch the De Minimis Changes: The "loophole" for low-value e-commerce shipments is closing. Expect those cheap direct-from-overseas packages to start carrying extra fees or duties by mid-year.
- Monitor the USMCA Review: The trade agreement with Canada and Mexico is up for review this July. This will be the next major flashpoint for North American prices, especially in the auto and energy sectors.
The "tariff war" isn't a temporary shock anymore; it’s a design constraint for the entire 2026 economy. Whether you think it’s a brilliant strategy or an economic headache, the reality is that the bill is currently being split between American businesses and your own wallet.