Study Reveals American Consumers Bear 96% of Tariff Costs

A recent study by the Kiel Institute for the World Economy has shed light on who truly bears the cost of tariffs implemented during the Trump administration. Contrary to the administration’s assertions, the study reveals that American consumers are primarily responsible for absorbing tariff costs.

Key Findings of the Study

The report indicates that American importers and consumers are shouldering 96% of the tariffs, with only 4% passed on to foreign exporters. This conclusion was reached just as new tariffs were being considered against U.S. allies.

Impact on Prices and Import Volume

• Price Increases: Prices in the U.S. have increased almost in direct correlation with tariffs.
• Export Reduction: Foreign nations have reduced their exports to the U.S., opting to maintain their profit margins over market share.
• Minimal Price Adjustment: A 10% rise in tariffs results in only a 0.39% drop in export prices, meaning U.S. importers cover most of the tariff burden.

For instance, if a 25% tariff is imposed, export prices would drop by less than 1%. Thus, U.S. consumers effectively pay 24% of the cost.

Consumer Burden and Tariff Revenue

The study highlighted that for every $100 collected in tariff revenue, approximately $96 is funded by U.S. consumers. The fiscal year 2025 saw the U.S. government collect $195 billion from tariffs, equating to around $187.2 billion directly from American households.

Reasons for Lack of Price Reductions

Researchers identified several reasons foreign exporters do not significantly lower their prices:

• Access to alternative markets diminishes reliance on U.S. sales.
• Price reductions are insufficient to offset steep tariffs.
• Temporary tariffs discourage permanent price adjustments.
• Established supply chains limit the ability to switch suppliers easily.

Economic Implications of Tariffs

While the U.S. economy has shown resilience, the tariffs have raised costs for consumers. Reports indicate that increased prices from tariffs cost the average American household about $1,700 in the previous year.

Future Considerations

The Trump administration has proposed ways to utilize tariff revenue, including potential benefits like a $2,000 dividend for citizens. Nevertheless, these plans raise concerns about their feasibility without escalating national debt.

Ultimately, the study demonstrates that tariffs function as a consumption tax primarily affecting American consumers rather than foreign entities. The findings challenge the notion that foreign countries bear the burden of U.S. tariffs, spotlighting the economic realities faced by American households and businesses.