A recent study released by a German think tank shows that the costs of the tariffs imposed by U.S. President Trump on imported goods are almost entirely borne by American importers, domestic customers, and ultimately, American consumers.
A report released on Monday by the Kiel Institute for the World Economy stated: 'In response to the U.S. imposition of additional tariffs, foreign exporters have not significantly reduced their product prices. The $200 billion in additional tariff revenue collected by the U.S. government has effectively been extracted directly from the pockets of American businesses and households.'
The study found that only about 4% of the tariff costs were borne by foreign companies, with the remaining 96% being 'almost entirely' passed on to U.S. buyers. After paying the tariffs, these importers either absorbed the costs themselves or raised prices. Manufacturers and retailers then faced a choice: whether to pass the increased costs downstream or bear the pressure of shrinking profit margins.
Julian Hinz, Aaron Lohmann, Hendrik Mahlkow, and Anna Vorwig, researchers at the Kiel Institute for the World Economy, wrote in the report: 'Such tariffs are not levied on foreign producers but rather constitute an indirect consumption tax imposed on the American public.'
The research focused particularly on Brazil and India. Last year, exports from these two countries became targets of large-scale, high-tariff measures by the United States. After a 50% tariff increase on Brazilian goods took effect, Brazilian exporters 'did not substantially lower their product prices in dollar terms.' The situation was similar in India—after its goods were subjected first to a 25% tariff and then, weeks later, a further increase to 50%, Indian exporters also did not lower their prices in response.
There are multiple reasons why exporters are reluctant to bear much of the tariff costs, including their ability to redirect their goods to other markets.
The report from the Kiel Institute for the World Economy noted: 'Market adjustments have not been achieved through price cuts by exporters but are instead reflected in a reduction in trade volume. For most exporters, they clearly prefer to maintain profitability at the expense of reduced sales volumes rather than cut prices to sustain higher sales.'
This study is based on shipping data covering 25 million transactions with a total value of approximately $4 trillion. Its findings stand in stark contrast to the Trump administration’s previous claim that 'tariff costs are borne by trading partners.'
The researchers emphasized in the report: 'This claim was the central rationale for the tariff policy—the government argued that tariffs could serve as a tool to pressure trading partners into concessions while generating revenue for the U.S. government without imposing any cost on American households. However, our findings suggest otherwise: American importers and consumers are nearly the sole bearers of the tariff costs.'
Editor/Melody
