Trump's tariffs had little impact on GDP in 2025, but raised revenue, academic paper finds

U.S. President Donald Trump's barrage of tariffs last year had only a minimal impact on U.S. economic output but raised significant federal revenue and contributed to a further U.S.-China trade decoupling, a new Brookings Institution academic paper showed on Wednesday.

The paper analyzing the short-run impact of Trump's tariffs found that their "net welfare impact" on the U.S. economy was a range of adding 0.1% of GDP to subtracting 0.13% of GDP, depending on assumptions about changing terms of trade, including the extent to which demand shifts to domestically produced goods.

Here are some other key findings of the study conducted by University of California-Los Angeles economist Pablo Fajgelbaum and Yale University economist Amit Khandelwal:

The minimal impact on real consumption masks large gross transfers to producers from consumers, but this distortion is largely offset by higher federal revenues and wage gains in some industries.

Pass-through of the tariffs to higher "tariff-inclusive" prices is high, at 80% to 100%. In a baseline scenario, the researchers estimated this at 90%, meaning that only 10% of the higher tariff cost was borne by foreign exporters.

Tariff rates rose to an 80-year high of 9.6% from 2.4% but applied tariff rates are lower and only affecting a small portion of GDP. The paper said about 57% of U.S. imports still enter duty-free, due to the U.S.-Mexico-Canada trade agreement and tariff exemptions for energy and certain electronics imports.

Revenue from the tariffs collected in 2025 totaled $264 billion, accounting for about 4.5% of total receipts, compared to about 1.6% over the past decade.

China's share of U.S. imports fell to just 7% in December 2025, from a 23% share in December 2017, before Trump imposed punitive tariffs on Chinese goods during his first term. But many of these imports have shifted to other countries.

The paper finds no evidence that tariffs have increased "friend-shoring" of supply chains to U.S.-allied countries, that they have increased U.S. manufacturing employment or reduced the overall U.S. trade deficit. Any benefits of the Trump administration's recent trade agreements aimed at opening foreign markets to U.S. exports remain to be seen.

-David Lawder/Reuters