There is no free lunch. Tariffs are no exception but far more complicated. They do not present a big shock, but they quietly work their way into the cost of what we buy and in the final analysis Americans pay for it all in obvious and not so obvious ways.
A new report says 55% of the cost of tariffs are being paid by consumers, the balance – so far – is being absorbed by importers and manufacturers.
How the cost is distributed
In the short term, U.S. businesses that import goods often absorb the tariff cost to avoid immediately raising prices for consumers. However, over time, the burden tends to shift. A recent Goldman Sachs analysis projected the following distribution for tariffs imposed in 2025:
- U.S. Consumers: 55% of the cost is passed on to consumers through higher retail prices.
- U.S. Companies: 22% is absorbed by domestic importing businesses and retailers, squeezing their profit margins.
- Foreign Exporters: 18% is absorbed by foreign producers who may lower their prices to remain competitive in the U.S. market.
The Trump administration says, no worries, we expected this, all will be well – and great – because manufacturing will be brought back to the US.
The problem with that is cost. It cost more to produce in the US, sometimes a lot more.
The biggest cost differences are labor (wages + benefits + tax), regulation/compliance, cost of land/energy/overhead, and scale.
For labor‐intensive goods (clothing, simple assembly, textiles), the U.S. disadvantage tends to be very large compared to places with very low wages.
For capital‐intensive, automated, or high‐skill goods, the gap can shrink, depending on how efficient the facility is, how close the supply chain is, etc.
And there is another problem, a long-term problem.
Actions by the Trump administration when it comes to immigration aren’t helping. The administration does not appear focused on the long-term in anything it does in the quest to isolate America from the global economy.
The USA does not have enough workers, particularly skilled workers, to meet the current and projected demands in the manufacturing sector.
This shortage is considered a major long-term challenge driven by demographics, changing skill requirements, and perception issues.
Key Statistics and Future Projections
The workforce gap in U.S. manufacturing is substantial and expected to grow:
- Unfilled Jobs: As of mid-2025, there were hundreds of thousands of manufacturing job openings remaining unfilled, according to the Bureau of Labor Statistics (BLS) data.
- Projected Shortfall: Industry studies project that the manufacturing sector will need millions of new employees between 2024 and 2033, but nearly half of those jobs—up to 1.9 million—could go unfilled if the current talent gap isn’t addressed.
- Economic Impact: This persistent labor shortage could cost the U.S. economy an estimated $1 trillion in lost manufacturing output by 2030.
Oh yes, if US companies continue to sacrifice earnings to absorb the cost of tariffs, it will be reflected in the stock market, perhaps negatively affecting your retirement and other investments. More likely companies will eventually raise prices which will be easier to do if they compete with higher cost US made products.
Either way, you lose.
QUINNSCOMMENTARY 
Al Lindquist:
Gee–all the bad things are mentioned and markets are at all time highs–don’t markets look ahead–if the future is so grim why are markets so buoyant–not only here but overseas–heck my overseas blue chip fund, which we have had for many years, is ahead, to date, close to 30%—I wonder why all the bad news has propelled the equities overseas?
I just love the hypo of the market–as Marty Zweig would say on Wall Street Week; “people with crystal balls end up eating crushed glass.” Market collapses almost always begin in the banking/bond system like the -36.55% (S&P) where loans became almost non existent or 2022 when interest rates climbed and the market fell 18.04%. Just earlier this week problems in the banking system saw equity prices fall by 1% or more.
Tariffs I do not like but unless the Fed pumps up money supply some prices will go up and others will come down–the French wine that costs $10.50 now from $9.00 prior to tariffs will cause some folks to buy U.S. vintners– some will increase their price others will hold steady to gain market share.
Just filled up with cheaper gas–and if the state did not have onerous tax it would have been cheaper.
If the future is so murky and disaster is around the corner what evidence shows that? Markets would have sold off long ago, but nobody can predict the future so maybe in a year all the bad news listed in the essay will have taken its toll.
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And the article didn’t even mention two of those most insidious parts of the tariffs. Selective exemptions for the deep pocketed companies that kiss the ring and pay “protection money”, while the small businesses get crushed. And the uncertainty that the on and off implementation has brought, basically freezing any new investment in manufacturing. Just a perfect recipe for killing our economy while simultaneously raising prices. There are logic arguments for targeted tariffs and even VAT type taxes, but this is just chaos based on corruption and incompetence.
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