First, are tariffs higher? It’s been hard to follow the many impositions, cancellations, negotiations and pauses in tariff policy. But one way to measure tariffs is “customs duties,” which is the revenue the government collects from tariffs on imported goods. The U.S. Treasury monthly statement for June shows customs duties at $108 billion for the fiscal year so far (since October 2024). Over the same period last year revenue was $56 billion.
That’s almost double, but part of the increase is due to a surge in imports that took place in the first quarter of 2025, as companies stockpiled imported products before tariffs increased. The quantity of imports in the first quarter was 15 percent higher than the first quarter last year.
That was before the big tariff announcement on April 2. The Treasury statement for March had customs duties at $44 billion for the fiscal year so far, compared to $38 billion in March 2024. That’s an increase of 16 percent, pretty much in line with the increase in imports.
But that means, in the three months since the tariff announcement, revenue has been $64 billion, compared to $18 billion in the same period last year. Tariff revenue has more than tripled. So yes, tariffs are higher.
Importing companies remit tariff payments as goods cross the border. Yet most economists think that consumers will pay the cost of the tariffs. Here’s why.
Imagine a foreign manufacturer of widgets. (That’s a product that economists often use when they don’t want to be specific.) Suppose it could sell widgets in two countries, the United States or Japan. It can sell them at the same price, for the same profit, in each county.
Then the United States imposes a tariff, which is a fee that the company must pay to keep selling in the U.S. If nothing else changes, it is less profitable to sell to the U.S. than it is to Japan, because part of the company’s profits must be paid in tariffs.
The company has three choices. It could change nothing, pay the U.S. tariff and accept the loss in profit. It could raise its price to U.S. customers to cover the tariff and earn the same profit. Or it could shift its sales to Japan for the same profit.
Perhaps some companies will “eat” the tariff, accepting lower profits so it can hang on to market share, or maintain goodwill in the big U.S. market. But many companies will attempt to raise their prices in the U.S. if buyers are willing to pay more. And many companies will shift sales to non-tariff countries.
The price of widgets in the U.S. will rise if the company passes on the tariff in higher prices. The price of widgets will also rise in the U.S. if sales shift to non-tariff counties, because the supply of widgets in the U.S. will be reduced. Short supplies tend to result in rising prices.
Are tariffs increasing inflation? The June Consumer Price Index report showed an inflation rate of 2.7 percent over the last 12 months. That was up from 2.4 percent in May. This might be a trend caused by tariffs. Or it might be just a one-time blip. We need to look deeper.
Most trade is in goods. Unless you’re near a border, you don’t have the option to import services like haircuts or plumbing repairs. About one-third of all durable goods are imported.
Over the past three months, durable goods prices rose at an annual rate of 0.6 percent. That’s not much, but in the year before that durable goods prices fell by 1 percent. Rising productivity means that goods prices fall, or prices remain the same as quality improves. That is why, most of the time, the inflation rate on durable goods is negative. But durable goods prices have been rising since April 2.
Tariffs have increased. Most companies will pass those tariffs on to their customers with higher prices. A large share of durable goods is imported. In the past three months the durable goods price index has been increasing, when it usually decreases. It’s too soon to tell for sure, but tariffs may be increasing inflation.
Capital Comments reflects and contains agricultural economics Professor Emeritus Larry DeBoer’s analysis and views.
