Category: Banking

nLight (NASDAQ:LASR) executives used a presentation at the TD Cowen Aerospace and Defense Conference to outline the company’s vertically integrated laser technology platform, its emphasis on defense-driven growth, and the rationale behind a recent equity raise intended to support investment ahead of expected demand.

Vertically integrated laser platform

Founder and CEO Scott Keeney described nLight as a high-power laser manufacturer that is vertically integrated “from the semiconductor chip all the way through to complete high-power laser subsystems.” He said the company is headquartered in the Pacific Northwest, which he framed as an advantage for a semiconductor-focused business due to proximity to major fabrication operations, and that nLight also operates a site in Colorado.

Keeney walked through what he described as the company’s technology “stack,” starting with gallium arsenide semiconductor wafers and chips, moving to packaged single-emitter devices coupled into fiber, and then to higher-level assemblies that form fiber lasers or fiber amplifiers. In directed energy configurations, he said multiple fiber amplifiers are integrated into an optical module for coherent beam combining, and then coupled into a beam director “that puts that light onto target.”

Defense focus: directed energy, sensing, and advanced manufacturing

Keeney said nLight began as a dual-use company serving commercial/industrial and defense markets, but that defense has more recently become the core market and is “driving our growth.” He tied the company’s priorities to U.S. defense technology focus areas, highlighting three areas he said are central for nLight: directed energy, sensing, and advanced manufacturing.

Directed energy. Keeney described directed energy as using high-power lasers to “damage, degrade, destroy” threats ranging from counter-drone applications to rockets, artillery, mortars, and missiles, as well as air- and space-based strategic uses. He emphasized the importance of beam-combining approaches, contrasting spectral combining with coherent combining. While he said nLight uses both, he argued coherent combining is the better path for higher-power applications because it can scale to higher power, produce a brighter source, and adjust the beam to compensate for atmospheric effects.

He stated that nLight has “the highest power laser in the world now at over 300 kW” and is “scaling to 1 MW right now.” He also argued that power alone is not sufficient, emphasizing brightness and atmospheric compensation as differentiators, and said the Pentagon is focused on implementing coherent beam combining.

Sensing. Keeney described sensing applications as using pulsed lasers for information gathering such as rangefinding and LiDAR. He said the company has been supporting programs of record for more than a decade and is deployed on “various missiles” that are ramping up. He also said nLight has space-qualified lasers for multiple applications. One area he highlighted was ISR, where he described LiDAR as complementing radar by providing higher resolution and fidelity, and doing so “in a stealthy way.”

Advanced manufacturing. In advanced manufacturing, Keeney focused on laser additive manufacturing for 3D printing metal parts. He cited hypersonics and rocket engines as key use cases and said nLight’s lasers are “core to the production of most of the key rocket engines that are being built today that are 3D-printed metal rocket engines.” He also described how the company adjusts beam characteristics for fine lattice structures versus bulk build speed, and said nLight has proprietary technology that can toggle between modes.

Thermal management and engineering constraints

During Q&A, Keeney said thermal management is critical for high-power lasers, noting that the heat flux at the semiconductor laser facet is “approaching the heat flux of the surface of the sun.” He described heat removal as a key engineering challenge across the system, from chip to full subsystem.

He also pointed to an intersection between thermal design and additive manufacturing, describing how some optimized coolers rely on complex channels that can be produced via laser additive manufacturing—characterizing it as “cooling the lasers with lasers that are printing those parts.”

Customer relationships and vertical integration as a differentiator

Asked about partners in sensing, Keeney said nLight works across government agencies and services and sells subsystems to prime contractors rather than acting as a prime itself. He said the company works with “all of the primes” in both sensing and directed energy.

On how vertical integration supports wins or execution, Keeney argued that rapidly evolving technology makes arm’s-length integration across multiple companies difficult due to transaction costs and limits on sharing proprietary information. As an example, he cited nLight’s acquisition of a Colorado-based business (Nutronics) for coherent beam combining and atmospheric correction technology. He said bringing that team in-house enabled tighter coupling across the entire technology stack, including influences back to chip-level design such as proprietary wavelength-locking to mitigate temperature-driven wavelength shifts and improve downstream performance.

Capital raise and investment priorities

Keeney addressed a question regarding a recent capital raise, stating the company raised $175 million, or $200 million including the greenshoe, and said nLight’s balance sheet is now “over $250 million.” He said the decision to raise capital was based on three priorities:

• Investing ahead of programs of record: Keeney said the directed energy end applications are “reasonably well known” and pressing, and that the enabling technology has matured only in recent years. He said nLight is investing in product development and new processes ahead of formal programs of record.
• Additional CapEx and operational investment: He cited ongoing investment across parts of the business.
• M&A capacity: He said the company wants flexibility to pursue acquisitions as it has in the past, referencing the post-IPO acquisition that established the Colorado site and describing it as transformative, while noting there was no specific deal being highlighted at the conference.

In a later exchange, executives discussed potential bottlenecks tied to lead times for specialized optics and components, which Keeney said can run around 12 months, prompting the company to place inventory “bets” and assess whether additional vertical integration is warranted. John Marchetti, vice president of corporate development and head of investor relations, added that nLight recently announced an expansion in Longmont and said a portion of the capital would be used to outfit that facility, including enabling concurrent system builds. Marchetti said those steps have been “very well received by the Pentagon.”

Looking ahead, Keeney said he is most excited about the growth potential in directed energy and sensing due to their market size and importance, while describing additive manufacturing as smaller by comparison. He also referenced lessons from Ukraine and said U.S. Indo-Pacific challenges are “arguably much bigger,” arguing that both directed energy and sensing are vital. He also mentioned “Golden Dome” as an area that would require both sensing and directed energy effectors working together.

About nLight (NASDAQ:LASR)

nLIGHT, Inc designs, develops, manufactures, and sells semiconductor and fiber lasers for industrial, microfabrication, and aerospace and defense applications. The company operates in two segments, Laser Products and Advanced Development. It offers semiconductor lasers with various ranges of power levels, wavelengths, and output fiber sizes; and programmable and serviceable fiber lasers for use in industrial and aerospace and defense applications. The company also provides laser sensors, including light detection and ranging technologies for intelligence, surveillance, and reconnaissance applications; and fiber amplifiers, beam combination, and control systems for use in high-energy laser systems in directed energy applications.

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The American Bankers Association today expressed support for a Department of Housing and Urban Development proposal to rescind the use of disparate impact in determining Fair Housing Act violations, saying the rule in question did not provide clarity “and has been the subject of an unhelpful back-and-forth between administrations.”

HUD in 2013 published a disparate impact rule under the FHA, formalizing a burden-shifting test for determining whether a given practice has an unjustified discriminatory effect. After numerous legal challenges – including a U.S. Supreme Court decision – the Biden administration in 2023 reinstated the earlier rule despite the high court ruling.

Earlier this year, HUD proposed rescinding the rule. ABA pointed to the lengthy legal battles over the rule in a letter to the agency.

“ABA and its members have long supported the fair and even-handed enforcement of laws prohibiting discrimination in lending, including the FHA and implementing regulations,” the association said. “Banks spend significant resources on fair lending compliance and on outreach to increase access to home ownership. However, the past tug-of-war between administrations over the rule’s text has been disruptive to banks’ efforts to maintain strong fair lending compliance management systems.”

“In 2015, the Supreme Court ruled on disparate impact and announced the safeguards necessary to ensure that constitutional problems do not arise from disparate impact claims,” ABA added. “Courts will continue to apply these standards to disparate impact claims, and those judicial interpretations will provide the needed clarity and predictability.”

Two lawmakers have introduced legislation to prevent states from imposing interest rate caps on loans from out-of-state chartered banks and credit unions.

Currently, states can opt out of the federal Depository Institutions Deregulation and Monetary Control Act, allowing them to establish restrictions on loans made by state-chartered banks. Colorado chose to opt out in 2024 and imposed restrictions on rates and fees on both state-chartered banks and banks chartered in other states. The restrictions were challenged in court, with the Tenth Circuit Court of Appeals last year siding with Colorado.

The American Lending Fairness Act by Sen. Bernie Moreno (R-Ohio) and Rep. Warren Davidson (R-Ohio) would prevent states from using the opt-out to impose interest rate caps on loans from out-of-state financial institutions. The bill will preserve states’ authority to regulate in-state chartered institutions, the sponsors said.

American Bankers Association President and CEO Rob Nichols said the bill would preserve the competitive parity that is an essential principle of the nation’s dual banking system.

“We appreciate their efforts to ensure state-chartered banks can compete on a level playing field with national banks, and we urge the House and Senate to move this bill forward,” Nichols said.

Banks have long been on the front lines of protecting customers from fraud, but they can’t do it alone, and social media companies and telecommunications providers must do more on their end, the American Bankers Association’s Paul Benda told Nebraska lawmakers this week.

Benda – who is EVP for risk, fraud and cybersecurity at ABA – testified in support of two anti-fraud bills currently before the Nebraska Legislature. The first bill, LB 1118, would require social media companies to take steps to detect and remove fraudulent advertising on their platforms. A similar bill – the SCAM Act – has been introduced at the federal level in the House and the Senate.

The second bill, LB 1082, would require telecommunications companies to protect their customers from receiving unwanted calls and text messages from unauthenticated numbers.

Benda testified on both bills at the request of the Nebraska Bankers Association.

“Nebraska banks are both stewards and leaders in our communities,” NBA Board Chair and First Bank CEO Mark Linville said. “We are committed to limiting the financial and emotional harm being committed against our fellow Nebraskans. Special thanks to the ABA for their focus on this topic and to Paul Benda for supporting Nebraska’s state-level public policy solutions.”

Social media scams

“The banking industry has invested billions to make our financial system one of the most secure in the world, and Americans recognize that effort,” Benda told members of Nebraska’s Banking, Commerce and Insurance Committee during a hearing on LB 1118. “Surveys show that nine in 10 consumers say their bank is taking proactive steps to protect them from scams. But criminals are innovating too.”

Benda pointed to media reports finding that Meta, which owns Facebook and Instagram, gets up to 10% of its revenue from scam ads. It can take anywhere from eight to 32 strikes to get an ad removed, he noted.

“These statistics are unacceptable,” he said. “Social media companies must do better and remove fake accounts and fraudulent ads more quickly.”

Telecom scams

As for LB 1082, Benda told the Nebraska Transportation and Telecommunications Committee that telecommunications must do more to stop criminals from impersonating banks through spoofed calls and fraudulent tests.

“If the phone says it’s your bank, most people will believe it,” Benda said. “The current system that validates and controls bad telecom behavior is broken.”

Banks are proud of the role they play in protecting consumers, he added. “Fraud is not just a banking problem – it is an ecosystem problem. Until all parts of that ecosystem are equally committed to protecting consumers, the American public will remain at risk.”

Mary Amiti, Chris Flanagan, Sebastian Heise, and David E. Weinstein

Over the course of 2025, the average tariff rate on U.S. imports increased from 2.6 to 13 percent. In this blog post, we ask how much of the tariffs were paid by the U.S., using import data through November 2025. We find that nearly 90 percent of the tariffs’ economic burden fell on U.S. firms and consumers.

2025 Tariffs 

In the chart below, we plot U.S. import tariffs by month in 2025. The blue dots depict the average statutory tariff rate, weighted by 2024 annual import values. The red dots show the average duty rate by month, calculated as total duties collected divided by the value of total imports. The average tariff rate was very low at the beginning of the year, at 2.6 percent. It then spiked in April and May, when tariffs on Chinese goods were raised by 125 percentage points, before being reversed by 115 percentage points in mid-May. By the end of the year, the average tariff rate was 13 percent. 

The Average Tariff Rate Has Increased

The average duty rate is lower than the average tariff rate because of the many exemptions granted. For example, although the U.S. levies a 35 percent tariff on Canadian imports, 83 percent of those imports are exempt from U.S. duties under the U.S.-Mexico-Canada Agreement (USMCA). A second reason for the lower average duties is that importers shift away from high-tariffed goods. The difference between the statutory rate and the duty rate peaked in April and May, when importers shifted away from Chinese imports in order to avoid the higher tariffs levied on Chinese goods. 

The next chart shows how global supply chains shifted in response to the higher tariffs. We plot import shares by country (or region) for 2017, 2024, and 2025, and countries are ordered by their 2017 import shares. These seven exporters accounted for approximately 80 percent of U.S. imports in 2017, with Chinese goods making up nearly 25 percent of total imports that year. Following a 9-percentage-point increase in tariffs on Chinese goods levied in 2018 and 2019, Chinese imports fell to around 15 percent by 2024. What is striking is that, in the first eleven months of 2025, China’s share of U.S. imports fell by another 5 percentage points, slipping below 10 percent. In contrast, Mexico and Vietnam gained the most market share. China now faces the highest tariffs among the countries and regions shown in the chart. 

China’s Share of U.S. Imports Has Fallen Markedly

Who Bears the Cost of Tariffs?

Tariff incidence is the technical term for how the costs of a tariff are split between foreign exporters and domestic importers. While importers pay the duty, the “economic burden” of the tariff can be shifted onto exporters if they lower their export prices. We illustrate this effect through a simple example: Suppose foreign exporters charge $100 for a good, and the importing country decides to levy a 25 percent tariff on it. If the foreign price remains unchanged at $100, the duty paid is $25, increasing the import price to $125. In this case, the tariff incidence falls entirely on the importer; in other words, there is 100 percent pass-through from tariffs to import prices, and therefore on U.S. consumers and firms. 

In contrast, the exporter might lower its price in order to avoid losing market share. If foreign exporters respond to the tariff by lowering their price to $80 (i.e., $100 divided by 1.25), the price paid by importers will remain $100 (with $20 in duties paid to the government). In this case, 100 percent of the tariff incidence falls on foreign exporters, who now receive $20 less for the same good; in other words, there is zero pass-through from the tariff since the import price is unchanged. 

Considering an intermediate case, suppose the exporter lowers its price to $96 to absorb some of the cost in response to the 25 percent tariff. The 25 percent tariff is then calculated on the new, lower price, making the tariff-inclusive price the importer pays $120. In this scenario, the lower export price means the exporter pays $4 of the burden, while the higher tariff-inclusive price means the importer pays $20. We define the incidence on the importer as the ratio between the price increase due to the tariff ($120 minus $100) and the total tariff revenues; in this example, the incidence on the importer is 83 percent ($20 divided by $24); the incidence on the exporter (that is, the price decrease they suffer as a ratio of the total revenues from tariffs) is 17 percent ($4 divided by $24). 

Because tariff incidence hinges on how tariffs affect export and import prices, we now focus on estimating the impact of tariffs on these prices. We follow the approach used in our previous study, which analyzed the effect of the 2018-2019 tariffs on prices for goods exported to the U.S. In that earlier work, we regressed the twelve-month percentage change in foreign export prices on the twelve-month percentage change in tariffs. We also controlled for average price changes of finely defined products across all countries, and changes in the average price of imports into any country in any month to isolate the differential effects of the tariff. Our past work found that foreign exporters did not lower their prices at all, so the full incidence of the tariffs was borne by the U.S. That is, there was 100 percent pass-through from tariffs into import prices. 

We now conduct the same analysis for the 2025 tariffs, covering twelve-month changes from January 2024 through November 2025 (the most recent available data). We report the results in the table below. In this analysis, we also allow the pass-through to change for different months in 2025. Our results show that the bulk of the tariff incidence continues to fall on U.S. firms and consumers. These findings are consistent with two other studies that report high pass-through of tariffs to U.S. import prices. 

Tariff Incidence Falls Mostly on U.S. Importers

We highlight two main results. First, 94 percent of the tariff incidence was borne by the U.S. in the first eight months of 2025. This result means that a 10 percent tariff caused only a 0.6 percentage point decline in foreign export prices. Second, the tariff pass-through into import prices has declined in the latter part of the year. That is, a larger share of the tariff incidence was borne by foreign exporters by the end of the year. In November, a 10 percent tariff was associated with a 1.4 percent decline in foreign export prices, suggesting an 86 percent pass-through to U.S. import prices. Given that the average tariff in December was 13 percent (see the first chart), our results imply that U.S. import prices for goods subject to the average tariff increased by 11 percent (13 times 0.86) more than those for goods not subject to tariffs. These higher import prices caused firms to reorganize supply chains, as suggested by the findings presented in the two charts above. 

In sum, U.S. firms and consumers continue to bear the bulk of the economic burden of the high tariffs imposed in 2025. 

Mary Amiti is head of Labor and Product Markets in the Federal Reserve Bank of New York’s Research and Statistics Group.

Chris Flanagan is a research analyst in the Federal Reserve Bank of New York’s Research and Statistics Group.

Sebastian Heise is a research economist in the Federal Reserve Bank of New York’s Research and Statistics Group. 

David E. Weinstein is an economics professor at Columbia University.

 @article{
        AmitiFlanaganHeiseWeinstein2026,
        author={Amiti, Mary and Flanagan, Chris and Heise, Sebastian and Weinstein, David E.},
        title={Who Is Paying for the 2025 U.S. Tariffs?},
        journal={Liberty Street Economics},
        note={Liberty Street Economics Blog},
        number={February 12},
        year={2026},
        url={https://doi.org/10.59576/lse.20260212}
    }

Mary Amiti, Chris Flanagan, Sebastian Heise, and David E. Weinstein

Over the course of 2025, the average tariff rate on U.S. imports increased from 2.6 to 13 percent. In this blog post, we ask how much of the tariffs were paid by the U.S., using import data through November 2025. We find that nearly 90 percent of the tariffs’ economic burden fell on U.S. firms and consumers.

2025 Tariffs 

In the chart below, we plot U.S. import tariffs by month in 2025. The blue dots depict the average statutory tariff rate, weighted by 2024 annual import values. The red dots show the average duty rate by month, calculated as total duties collected divided by the value of total imports. The average tariff rate was very low at the beginning of the year, at 2.6 percent. It then spiked in April and May, when tariffs on Chinese goods were raised by 125 percentage points, before being reversed by 115 percentage points in mid-May. By the end of the year, the average tariff rate was 13 percent. 

The Average Tariff Rate Has Increased

The average duty rate is lower than the average tariff rate because of the many exemptions granted. For example, although the U.S. levies a 35 percent tariff on Canadian imports, 83 percent of those imports are exempt from U.S. duties under the U.S.-Mexico-Canada Agreement (USMCA). A second reason for the lower average duties is that importers shift away from high-tariffed goods. The difference between the statutory rate and the duty rate peaked in April and May, when importers shifted away from Chinese imports in order to avoid the higher tariffs levied on Chinese goods. 

The next chart shows how global supply chains shifted in response to the higher tariffs. We plot import shares by country (or region) for 2017, 2024, and 2025, and countries are ordered by their 2017 import shares. These seven exporters accounted for approximately 80 percent of U.S. imports in 2017, with Chinese goods making up nearly 25 percent of total imports that year. Following a 9-percentage-point increase in tariffs on Chinese goods levied in 2018 and 2019, Chinese imports fell to around 15 percent by 2024. What is striking is that, in the first eleven months of 2025, China’s share of U.S. imports fell by another 5 percentage points, slipping below 10 percent. In contrast, Mexico and Vietnam gained the most market share. China now faces the highest tariffs among the countries and regions shown in the chart. 

China’s Share of U.S. Imports Has Fallen Markedly

Who Bears the Cost of Tariffs?

Tariff incidence is the technical term for how the costs of a tariff are split between foreign exporters and domestic importers. While importers pay the duty, the “economic burden” of the tariff can be shifted onto exporters if they lower their export prices. We illustrate this effect through a simple example: Suppose foreign exporters charge $100 for a good, and the importing country decides to levy a 25 percent tariff on it. If the foreign price remains unchanged at $100, the duty paid is $25, increasing the import price to $125. In this case, the tariff incidence falls entirely on the importer; in other words, there is 100 percent pass-through from tariffs to import prices, and therefore on U.S. consumers and firms. 

In contrast, the exporter might lower its price in order to avoid losing market share. If foreign exporters respond to the tariff by lowering their price to $80 (i.e., $100 divided by 1.25), the price paid by importers will remain $100 (with $20 in duties paid to the government). In this case, 100 percent of the tariff incidence falls on foreign exporters, who now receive $20 less for the same good; in other words, there is zero pass-through from the tariff since the import price is unchanged. 

Considering an intermediate case, suppose the exporter lowers its price to $96 to absorb some of the cost in response to the 25 percent tariff. The 25 percent tariff is then calculated on the new, lower price, making the tariff-inclusive price the importer pays $120. In this scenario, the lower export price means the exporter pays $4 of the burden, while the higher tariff-inclusive price means the importer pays $20. We define the incidence on the importer as the ratio between the price increase due to the tariff ($120 minus $100) and the total tariff revenues; in this example, the incidence on the importer is 83 percent ($20 divided by $24); the incidence on the exporter (that is, the price decrease they suffer as a ratio of the total revenues from tariffs) is 17 percent ($4 divided by $24). 

Because tariff incidence hinges on how tariffs affect export and import prices, we now focus on estimating the impact of tariffs on these prices. We follow the approach used in our previous study, which analyzed the effect of the 2018-2019 tariffs on prices for goods exported to the U.S. In that earlier work, we regressed the twelve-month percentage change in foreign export prices on the twelve-month percentage change in tariffs. We also controlled for average price changes of finely defined products across all countries, and changes in the average price of imports into any country in any month to isolate the differential effects of the tariff. Our past work found that foreign exporters did not lower their prices at all, so the full incidence of the tariffs was borne by the U.S. That is, there was 100 percent pass-through from tariffs into import prices. 

We now conduct the same analysis for the 2025 tariffs, covering twelve-month changes from January 2024 through November 2025 (the most recent available data). We report the results in the table below. In this analysis, we also allow the pass-through to change for different months in 2025. Our results show that the bulk of the tariff incidence continues to fall on U.S. firms and consumers. These findings are consistent with two other studies that report high pass-through of tariffs to U.S. import prices. 

Tariff Incidence Falls Mostly on U.S. Importers

We highlight two main results. First, 94 percent of the tariff incidence was borne by the U.S. in the first eight months of 2025. This result means that a 10 percent tariff caused only a 0.6 percentage point decline in foreign export prices. Second, the tariff pass-through into import prices has declined in the latter part of the year. That is, a larger share of the tariff incidence was borne by foreign exporters by the end of the year. In November, a 10 percent tariff was associated with a 1.4 percent decline in foreign export prices, suggesting an 86 percent pass-through to U.S. import prices. Given that the average tariff in December was 13 percent (see the first chart), our results imply that U.S. import prices for goods subject to the average tariff increased by 11 percent (13 times 0.86) more than those for goods not subject to tariffs. These higher import prices caused firms to reorganize supply chains, as suggested by the findings presented in the two charts above. 

In sum, U.S. firms and consumers continue to bear the bulk of the economic burden of the high tariffs imposed in 2025. 

Mary Amiti is head of Labor and Product Markets in the Federal Reserve Bank of New York’s Research and Statistics Group.

Chris Flanagan is a research analyst in the Federal Reserve Bank of New York’s Research and Statistics Group.

Sebastian Heise is a research economist in the Federal Reserve Bank of New York’s Research and Statistics Group. 

David E. Weinstein is an economics professor at Columbia University.

 @article{
        AmitiFlanaganHeiseWeinstein2026,
        author={Amiti, Mary and Flanagan, Chris and Heise, Sebastian and Weinstein, David E.},
        title={Who Is Paying for the 2025 U.S. Tariffs?},
        journal={Liberty Street Economics},
        note={Liberty Street Economics Blog},
        number={February 12},
        year={2026},
        url={https://doi.org/10.59576/lse.20260212}
    }

Mary Amiti, Chris Flanagan, Sebastian Heise, and David E. Weinstein

Over the course of 2025, the average tariff rate on U.S. imports increased from 2.6 to 13 percent. In this blog post, we ask how much of the tariffs were paid by the U.S., using import data through November 2025. We find that nearly 90 percent of the tariffs’ economic burden fell on U.S. firms and consumers.

2025 Tariffs 

In the chart below, we plot U.S. import tariffs by month in 2025. The blue dots depict the average statutory tariff rate, weighted by 2024 annual import values. The red dots show the average duty rate by month, calculated as total duties collected divided by the value of total imports. The average tariff rate was very low at the beginning of the year, at 2.6 percent. It then spiked in April and May, when tariffs on Chinese goods were raised by 125 percentage points, before being reversed by 115 percentage points in mid-May. By the end of the year, the average tariff rate was 13 percent. 

The Average Tariff Rate Has Increased

The average duty rate is lower than the average tariff rate because of the many exemptions granted. For example, although the U.S. levies a 35 percent tariff on Canadian imports, 83 percent of those imports are exempt from U.S. duties under the U.S.-Mexico-Canada Agreement (USMCA). A second reason for the lower average duties is that importers shift away from high-tariffed goods. The difference between the statutory rate and the duty rate peaked in April and May, when importers shifted away from Chinese imports in order to avoid the higher tariffs levied on Chinese goods. 

The next chart shows how global supply chains shifted in response to the higher tariffs. We plot import shares by country (or region) for 2017, 2024, and 2025, and countries are ordered by their 2017 import shares. These seven exporters accounted for approximately 80 percent of U.S. imports in 2017, with Chinese goods making up nearly 25 percent of total imports that year. Following a 9-percentage-point increase in tariffs on Chinese goods levied in 2018 and 2019, Chinese imports fell to around 15 percent by 2024. What is striking is that, in the first eleven months of 2025, China’s share of U.S. imports fell by another 5 percentage points, slipping below 10 percent. In contrast, Mexico and Vietnam gained the most market share. China now faces the highest tariffs among the countries and regions shown in the chart. 

China’s Share of U.S. Imports Has Fallen Markedly

Who Bears the Cost of Tariffs?

Tariff incidence is the technical term for how the costs of a tariff are split between foreign exporters and domestic importers. While importers pay the duty, the “economic burden” of the tariff can be shifted onto exporters if they lower their export prices. We illustrate this effect through a simple example: Suppose foreign exporters charge $100 for a good, and the importing country decides to levy a 25 percent tariff on it. If the foreign price remains unchanged at $100, the duty paid is $25, increasing the import price to $125. In this case, the tariff incidence falls entirely on the importer; in other words, there is 100 percent pass-through from tariffs to import prices, and therefore on U.S. consumers and firms. 

In contrast, the exporter might lower its price in order to avoid losing market share. If foreign exporters respond to the tariff by lowering their price to $80 (i.e., $100 divided by 1.25), the price paid by importers will remain $100 (with $20 in duties paid to the government). In this case, 100 percent of the tariff incidence falls on foreign exporters, who now receive $20 less for the same good; in other words, there is zero pass-through from the tariff since the import price is unchanged. 

Considering an intermediate case, suppose the exporter lowers its price to $96 to absorb some of the cost in response to the 25 percent tariff. The 25 percent tariff is then calculated on the new, lower price, making the tariff-inclusive price the importer pays $120. In this scenario, the lower export price means the exporter pays $4 of the burden, while the higher tariff-inclusive price means the importer pays $20. We define the incidence on the importer as the ratio between the price increase due to the tariff ($120 minus $100) and the total tariff revenues; in this example, the incidence on the importer is 83 percent ($20 divided by $24); the incidence on the exporter (that is, the price decrease they suffer as a ratio of the total revenues from tariffs) is 17 percent ($4 divided by $24). 

Because tariff incidence hinges on how tariffs affect export and import prices, we now focus on estimating the impact of tariffs on these prices. We follow the approach used in our previous study, which analyzed the effect of the 2018-2019 tariffs on prices for goods exported to the U.S. In that earlier work, we regressed the twelve-month percentage change in foreign export prices on the twelve-month percentage change in tariffs. We also controlled for average price changes of finely defined products across all countries, and changes in the average price of imports into any country in any month to isolate the differential effects of the tariff. Our past work found that foreign exporters did not lower their prices at all, so the full incidence of the tariffs was borne by the U.S. That is, there was 100 percent pass-through from tariffs into import prices. 

We now conduct the same analysis for the 2025 tariffs, covering twelve-month changes from January 2024 through November 2025 (the most recent available data). We report the results in the table below. In this analysis, we also allow the pass-through to change for different months in 2025. Our results show that the bulk of the tariff incidence continues to fall on U.S. firms and consumers. These findings are consistent with two other studies that report high pass-through of tariffs to U.S. import prices. 

Tariff Incidence Falls Mostly on U.S. Importers

We highlight two main results. First, 94 percent of the tariff incidence was borne by the U.S. in the first eight months of 2025. This result means that a 10 percent tariff caused only a 0.6 percentage point decline in foreign export prices. Second, the tariff pass-through into import prices has declined in the latter part of the year. That is, a larger share of the tariff incidence was borne by foreign exporters by the end of the year. In November, a 10 percent tariff was associated with a 1.4 percent decline in foreign export prices, suggesting an 86 percent pass-through to U.S. import prices. Given that the average tariff in December was 13 percent (see the first chart), our results imply that U.S. import prices for goods subject to the average tariff increased by 11 percent (13 times 0.86) more than those for goods not subject to tariffs. These higher import prices caused firms to reorganize supply chains, as suggested by the findings presented in the two charts above. 

In sum, U.S. firms and consumers continue to bear the bulk of the economic burden of the high tariffs imposed in 2025. 

Mary Amiti is head of Labor and Product Markets in the Federal Reserve Bank of New York’s Research and Statistics Group.

Chris Flanagan is a research analyst in the Federal Reserve Bank of New York’s Research and Statistics Group.

Sebastian Heise is a research economist in the Federal Reserve Bank of New York’s Research and Statistics Group. 

David E. Weinstein is an economics professor at Columbia University.

 @article{
        AmitiFlanaganHeiseWeinstein2026,
        author={Amiti, Mary and Flanagan, Chris and Heise, Sebastian and Weinstein, David E.},
        title={Who Is Paying for the 2025 U.S. Tariffs?},
        journal={Liberty Street Economics},
        note={Liberty Street Economics Blog},
        number={February 12},
        year={2026},
        url={https://doi.org/10.59576/lse.20260212}
    }