When the United States imposes a tariff, the party that pays it is the U.S. business that imports the goods, known in customs law as the importer of record. The foreign manufacturer or foreign government does not write a check to the U.S. Treasury. In almost every case, though, the importer treats the tariff as a cost of doing business and passes some or all of it forward, so the people who ultimately pay tariffs are U.S. consumers and U.S. companies further down the supply chain.
The Importer of Record Is Legally on the Hook
Federal law puts the duty obligation on the U.S. owner, purchaser, or licensed customs broker who files entry paperwork for a shipment. Under 19 U.S.C. § 1484, that party must use reasonable care to declare the value, classification, and applicable duty rate for goods crossing the border.1Office of the Law Revision Counsel. 19 USC 1484 – Entry of Merchandise The foreign seller has no payment obligation to U.S. Customs and Border Protection. Every dollar of tariff revenue is collected from an entity inside the United States.
That distinction gets blurred in political language, where tariffs are often described as money paid by another country. The statute does not work that way. In fiscal year 2025, the federal government took in roughly $264 billion in customs revenue, and every dollar of it came from a U.S.-based importer depositing duties with CBP.
Payment happens at entry. The importer or their broker files through the Automated Commercial Environment, and estimated duties must be deposited at the time of entry or within 12 working days after entry or release of the goods.2Office of the Law Revision Counsel. 19 USC 1505 – Payment of Duties and Fees The amount is later reviewed and finalized during a process called liquidation, which can produce either a bill for underpayment or a refund with interest.
How the Cost Reaches Consumers
Legal responsibility and economic burden are not the same thing. A company that pays a 25 or 50 percent duty on its inventory treats that duty like any other input cost. To stay profitable, it raises prices. There is no line item on a receipt labeled “tariff,” but the number is baked in.
Research on the tariffs imposed on Chinese goods found the duties were almost fully reflected in U.S. import prices, with some businesses absorbing a portion by accepting thinner margins rather than raising retail prices right away. When an entire product category is hit with the same duty, competitive pressure to hold prices down weakens, and the shift to consumers becomes broader.
How much of the tariff a buyer ends up paying depends on how easily they can walk away. For products with few substitutes, such as certain electronics components, specialized industrial equipment, and some medications, importers can pass along nearly the full duty because buyers have nowhere else to go. For discretionary goods where shoppers can switch brands or skip the purchase, importers absorb more of the cost to protect sales volume. Either way, the money comes out of the domestic economy.
Domestic Manufacturers Pay Too
Tariffs do not only fall on companies that import finished products. U.S. manufacturers that buy imported raw materials — steel, aluminum, copper, semiconductors, specialized chemicals — see higher input costs even though they never deal with CBP directly. Their suppliers, who are the importers of record, hand the duty forward as a higher price for the material.
That ripple can hurt the industries tariffs are meant to help. A U.S. factory buying tariff-inflated steel to build heavy machinery may struggle to compete with a foreign rival sourcing the same steel domestically at a lower cost. Companies in that position often delay equipment purchases, slow hiring, or shift sourcing to countries with lower tariff exposure. Tariffs create winners and losers inside the same economy: domestic producers of a protected material on one side, domestic manufacturers who use that material on the other.
Small Overseas Purchases No Longer Slip Through
Consumers who buy directly from overseas sellers used to avoid tariffs on shipments under $800 through the de minimis exemption set by the Trade Facilitation and Trade Enforcement Act.3U.S. Customs and Border Protection. Section 321 Programs That exemption is gone. A series of executive orders beginning in early 2025 first ended de minimis treatment for goods from China and then extended the suspension to all countries. As of February 24, 2026, the duty-free de minimis exemption no longer applies to any shipment regardless of value, country of origin, or method of entry.4The White House. Continuing the Suspension of Duty-Free De Minimis Treatment for All Countries Even small international orders now carry duty, so consumers who assume a cheap parcel from abroad is tariff-free should not.
What Can Reduce the Bill for the Importer
An importer paying tariffs has a few ways to soften the hit, though none of them make the duty disappear.
Tariff payments generally qualify as deductible ordinary and necessary business expenses under 26 U.S.C. § 162, the same section that covers rent, salaries, and other operating costs.5Office of the Law Revision Counsel. 26 USC 162 – Trade or Business Expenses The deduction reduces taxable income but not the cash outflow. A business paying $100,000 in tariffs might save roughly $21,000 in federal income tax at the current 21 percent corporate rate, and it still spent the other $79,000. That $79,000 tends to show up in what customers pay.
Businesses that import goods, pay the duty, and later export the goods (or products made from them) can recover up to 99 percent of the tariffs through duty drawback under 19 U.S.C. § 1313.6Office of the Law Revision Counsel. 19 USC 1313 – Drawback and Refunds The claim must be filed within five years of the original import date, and the goods must be exported or destroyed under customs supervision. Drawback covers imported materials used to manufacture an exported product, nonconforming goods that are returned, and unused merchandise that is simply re-exported. The government keeps 1 percent as an administrative cost.
A business can also request a product-specific exclusion from tariffs imposed under trade actions such as Section 301 or Section 232. The request must describe the product in enough physical detail — form, dimensions, weight, materials — that CBP can consistently identify it at the border, and it must include the 10-digit Harmonized Tariff Schedule classification. A granted exclusion retroactively eliminates tariffs on qualifying shipments for a set period and produces a refund of duties already paid.
If CBP classifies, values, or assesses a shipment in a way the importer believes is wrong, the remedy is a formal protest under 19 U.S.C. § 1514, filed within 180 days of the liquidation notice.7Office of the Law Revision Counsel. 19 USC 1514 – Protest Against Decisions of Customs Service A denied protest can be appealed to the U.S. Court of International Trade. Missing the 180-day window generally forfeits the right to challenge the assessment.
None of these tools change who the government collects from. They can reduce what a specific importer ultimately keeps out of pocket, but the check to CBP is still written by a domestic business, and the cost that survives all the offsets is what gets built into the price paid by the next buyer down the line.