The trade war dominated economic headlines in 2025, and the pressure is far from easing. Tariff costs have landed largely on U.S. companies, while global trade has shown surprising resilience in the face of policy uncertainty and rising costs.
Tariff costs & U.S. companies
Since the trade war began in 2025, one key question has remained: Who bears the final cost of tariffs?
The administration has argued that foreign companies may absorb part of the cost by lowering prices to maintain access to the United States market. Historically, tariffs can also be passed through to consumers in the form of higher prices. Current data suggests that, so far, much of the cost has been absorbed by U.S. companies.
Foreign exporters’ margins have generally remained stable, while consumer inflation has risen less than some forecasts anticipated. Together, these trends suggest that U.S. businesses are carrying a significant share of the tariff-related cost increase at this stage.
Import prices also point to limited price reductions by foreign suppliers. The import price index rose 0.7% in 2025, close to its average annual increase of 0.5% since 2010. Some categories, including spirits, timber, cosmetics, steel and textiles, recorded notable price declines. However, those decreases were not broad enough to indicate a widespread pattern of foreign companies cutting prices to preserve U.S. market share.
Consumer inflation ended 2025 at an average annual rate of 2.8%. Without the trade war, inflation may have been closer to 2%. However, the rate remained below the 3.5% to 4% range that some estimates associated with average tariffs of about 15%. At this stage, the figures suggest only partial pass-through to consumers.
The impact is more visible in business input costs. Companies with significant tariff exposure saw higher input inflation in 2025. By year-end, input inflation reached 20% in metalworking, 9% in household appliances, 8% in the automotive sector, 6% in machine tools and textiles, and 5% in electronics. In several of these sectors, gross margins were flat or contracting.
Data for the graph in .xlsx format
Source: Coface calculations based on figures from the Bureau of Labour Statistics and the Census Bureau, Macrobond.
This trend does not contradict the broader resilience of the U.S. economy. GDP growth can coexist with uneven conditions across industries and companies.
Business insolvencies have increased alongside these cost pressures. Bankruptcy filings are currently about 15% above their 2019 average and have remained elevated for three consecutive quarters, the first such period since the pandemic. Many companies continue to manage the environment through cash reserves, productivity gains or selective pricing adjustments. Others are facing greater financial pressure.
Consumers also appear cautious about further price increases following the inflationary period that followed the COVID-19 pandemic. Concerns about affordability remain an important factor for businesses as they assess how much additional cost can be passed on to customers.
Data for the graph in .xlsx format
Tariff costs may be weighing on U.S. companies
The U.S. tariff measures have added volatility to global trade flows, although they have not reversed trade activity overall.
U.S. imports rose sharply at the beginning of 2025 as companies moved goods ahead of tariff implementation. Import volumes increased 25% in the first quarter compared with the same period in 2024.
A second increase followed in April after the announcement of a 90-day truce, which prompted another round of purchases. This front-loading contributed to weaker import activity later in the year. Even with that slowdown, U.S. imports remained relatively strong in 2025.
For the full year, imports rose 4.2%, compared with 5.2% growth in 2024. This contributed to the persistence of the U.S. trade deficit, despite the administration’s stated goal of reducing it through tariff policy.
Data for the graph in .xlsx format
Trade volatility also affected maritime shipping costs. Freight rates were relatively stable in the first quarter, as carriers had anticipated higher demand before tariffs took effect. However, the second wave of demand was less expected. At the same time, some shipping companies had reduced capacity on trans-Pacific routes in anticipation of lower trade volumes.
As a result, container freight rates increased sharply from early May. Rates rose 70% over four weeks, while the Shanghai-to-Los Angeles route rose nearly 120%.
Tariffs also contributed to changes in global trade patterns. One effect has been renewed attention on “connector countries,” which serve as intermediaries in trade flows between China and the United States.
This trend first became more visible during the U.S.-China trade tensions that began in 2018. In 2025, tariff differences appear to have accelerated the role of some connector countries, particularly those facing lower tariffs than China.
Vietnam is a notable example. Between 2017 and 2024, Vietnam’s share of U.S. imports increased by an average of 0.3 percentage points per year, rising from 2% to 4.2%. In 2025, its share increased by 1.5 percentage points.
U.S. imports from Vietnam rose 42% by value in 2025, accounting for nearly 44% of the decline in imports from China. Chinese exports to Vietnam rose by a similar amount, suggesting that Vietnam may be serving as an intermediary hub for some trade flows.
Thailand showed a similar pattern, although the increase in U.S. imports from Thailand was smaller in value. The increase also coincided with higher Chinese exports to Thailand.
Mexico’s role is less clear. Its exports to the United States increased in 2025, but that rise was much larger than the increase in Chinese exports to Mexico. This makes it harder to determine the extent to which Mexico acted as an intermediary in the same way as Vietnam or Thailand.
Data for the graph in .xlsx format
Source: US Census Bureau, Coface
The uncertain future of the tariff instrument
The current tariff environment remains subject to legal and policy uncertainty.
On Feb. 20, 2026, the U.S. Supreme Court invalidated tariffs applied under the International Emergency Economic Powers Act. The decision affected many of the so-called reciprocal tariffs announced on April 2, 2025, as well as tariffs linked to fentanyl-related measures affecting Mexico, Canada and China.
Other tariffs remain in place. Section 232 tariffs, which allow the president to impose measures when certain imports are considered a national security concern, continue to apply to sectors such as metals, automotive and timber. Section 301 tariffs, which are primarily directed at China and were largely introduced during Donald Trump’s first term, also remain in effect.
The financial implications may be significant. Of the $272 billion in tariffs collected since March 2025, about $166 billion was collected under the International Emergency Economic Powers Act. Those funds could potentially be refunded to the U.S. companies that paid them.
To replace the invalidated tariffs, the White House invoked Section 122 of the Trade Act of 1974. This temporary measure allows a general tariff of 10%, which can rise to 15%, through July 24. Renewal would require congressional approval. The administration is also examining other legal tools, including potential measures under Sections 232 and 301.
For companies, three points are important.
- First, tariff policy remains a central part of the administration’s trade approach. Businesses should not assume a rapid return to pre-2025 tariff conditions.
- Second, legal uncertainty is now part of the trade environment. If tariffs that have been in place for several months can be invalidated, companies may face challenges in planning around future costs, sourcing decisions and pricing strategies.
- Third, the ability of companies to absorb tariff-related costs may vary by sector and company size. Some firms may continue to offset costs through productivity gains, cash reserves or supplier negotiations. Others may face pressure to adjust prices, reduce margins or reconsider supply chains.
After the initial tariff adjustments of 2025, the trade environment may now be entering a longer phase marked by slower changes, continued legal questions and uneven effects across industries.
1 Measured by the business input price index compiled by the Bureau of Labor Statistics (BLS), “inputs to industry price indexes”
