The tariffs imposed by President Trump will cost businesses about $1.2 trillion this year, with most of the cost passed to consumers in the form of higher prices, according to a new report from S&P Global.
“The sources of this trillion-dollar squeeze are broad,” S&P analyst Daniel Sandberg said in the report, per CNBC. “Tariffs and trade barriers act as taxes on supply chains and divert cash to governments; logistics delays and freight costs compound the effect.”
As a general rule, the cost of tariffs is spread out along the supply chain, from suppliers to wholesalers to consumers. In the case of Trump’s tariffs, the S&P analysts estimate that about a third of the cost will be borne by businesses, both exporters and importers. The largest share, about two-thirds, will be paid by consumers — and that could be a conservative estimate.
“With real output declining, consumers are paying more for less, suggesting that this two-thirds share represents a lower bound on their true burden,” Sandberg said.
In the long run, following a period of lower profits, the analysts expect businesses to recover the profit margins they were earning before the tariffs. In the meantime, consumers must adjust to higher prices.