A PILLAR of US President Donald Trump’s policies has been tariffs, which are taxes on products imported from other countries.
He has imposed or threatened to impose them as a way to influence global supply chains, raise revenue and extract concessions from other countries. On Tuesday, March 4, his 25% tariffs against Canada and Mexico will come into effect — on top of others already imposed on China and specific industries like steel.
But what can often be lost amid proclamations targeting other countries is who ultimately pays for tariffs. It often isn’t the country itself.
Understanding who will end up paying for the higher costs means understanding how manufacturing, trade and supply chains function – and how costs build along each step of the complex process. Take shoes, for example.
> Step 1: Manufacturing overseas
The majority of shoes bought in the United States are made in China.
Nearly all shoes sold in American stores come from other countries, with imports recently making up more than 95% of the market. Over the years, shoe manufacturing gradually moved to China, Vietnam and Indonesia, among other countries, where production costs are lower. For the United States, China remains the dominant source, producing more than half of all footwear imports.
The production process starts in Chinese factories where workers assemble the sneakers. The final production cost can vary, depending on the materials. It can typically average around US$14 per pair, which also covers labour and factory overhead plus manufacturer margin.
> Step 2: Export preparation
Almost all goods sent to the United States have been subject to some tariffs.
To prepare the finished product for export, the shoe producer consults a wonky system run by the U.S. International Trade Commission known as the Harmonized Tariff Schedule, which determines tariff rates for different products and categories.
Even before Trump imposed new tariffs when he started his second term, most products that entered the country were subject to some amount of tariffs.
Tariff rates on imported shoes can vary, with over 430 different classifications based on materials and styles. Sneakers that were not made of leather and were imported from China, for example, typically had a 20% tariff, according to Matt Priest, CEO of the Footwear Distributors and Retailers of America.
> Step 3: Shipping
Shipping and logistics add to import costs.
Sneakers are shipped to one of the US ports. This adds around US$3 per pair for shipping and another US$3 for other logistics costs.
> Step 4: Tariff point
Before the shoes can enter the country, the importer pays a tariff to US Customs.
Once the product reaches the US port, the importing company typically works with a licensed customs broker to handle the tariff payments to US Customs and Border Protection.
These specialists manage all customs documentation and compliance requirements on behalf of the importer. While the previous 20% tariff resulted in a US$24 import price, an additional 10% tariff Trump imposed on Chinese goods now adds US$2 per pair, bringing the total import price to US$26.
What happens next
Who pays for the increased price?
Most trade policy experts agree that the U.S. economy will most likely bear the cost of the additional tariffs, which can occur in several ways.
> Scenario 1: Consumers
To offset higher import costs, retailers often increase prices, passing the burden on to consumers. As a result, consumers effectively pay for the tariff, reducing their purchasing power.
“Even though the legal burden of tariffs fall on the importer, what we see is that the full economic burden is more often passed to the US economy. And consumers often end up paying for the higher costs,” said Erica York, a tax policy analyst at Tax Foundation.
> Scenario 2: American retail and manufacturing companies
US companies and manufacturers that use imported materials face higher costs, whether they continue sourcing from China or switch to more expensive domestic suppliers. While they may absorb these costs to maintain competitive prices, doing so reduces their available capital for other business investments and operations, ultimately affecting the broader U.S. economy.
> Scenario 3: Foreign manufacturers
The US economy can sometimes avoid the burden of tariffs, which instead primarily harm the companies in the targeted country. Manufacturers in countries where tariffs are imposed sometimes choose to reduce their prices and accept lower profit margins so they can stay competitive in the US market. This strategy, however, has rarely emerged in similar situations, experts said.
> Scenario 4: American exporters
Imposing tariffs on imports can drive up the value of the US dollar, making American exports more expensive and less competitive. As a result, US exporters may suffer and indirectly pay the cost of the tariffs.
While these are some of the many scenarios, tariffs rarely affect just one group, as their effects ripple through the entire supply chain, with manufacturers, retailers and consumers often sharing the burden in different ways.
As companies try to adapt to minimise these costs, some importers may start shifting their production to countries without high tariffs. Meanwhile, consumers can change their buying habits, switching to different brands or alternative products that haven’t been hit by price increases.
Though researchers and policymakers can predict some of these effects, the full scope of market reactions often unfolds in unexpected ways, shaped by factors including local competition and how quickly companies can change their supply chains. – 2025 The New York Times Company
This article originally appeared in The New York Times.
