Trump tariff data exposed! 96% of the costs are borne domestically in the US, draining liquidity from the crypto market

Germany’s Kiel Institute for the World Economy research shows that 96% of Trump’s tariffs’ costs are borne by American consumers and importers, amounting to nearly $200 billion paid domestically. Tariffs act like invisible consumption taxes, quietly eroding disposable liquidity, which explains the stagnation in the crypto markets after October. Only 20% of tariff costs are passed on to consumers within six months; the rest are absorbed by businesses, squeezing profits.

96% of Trump’s Tariffs’ Costs Are Borne Domestically

The latest study cited by The Wall Street Journal indicates that U.S. tariffs are quietly dragging down the domestic economy. This drag may explain why the cryptocurrency market has struggled to regain momentum since the sell-off wave starting last October. A study by the Kiel Institute for the World Economy found that between January 2024 and November 2025, 96% of the costs from Trump’s tariffs are absorbed by American consumers and importers, with foreign exporters bearing only 4%. Nearly all of the $200 billion in tariff revenue is paid within the U.S. economy.

This research challenges a core political narrative that tariffs are borne by foreign producers. In reality, U.S. importers pay tariffs at the border and then bear or pass on these costs themselves. Foreign exporters generally keep prices stable. Instead, they reduce export volumes or shift supply to other markets. The result is a decline in trade volume, not a drop in import prices.

Economists describe this effect as a slowly-implemented consumption tax. Prices do not spike immediately; costs gradually permeate the supply chain over time. This incremental cost transfer masks the true impact of tariffs, leading the public to feel rising living costs but find it difficult to directly attribute them to tariff policies.

Numerically, spreading $200 billion of tariff costs over the U.S. population of 330 million results in about $606 per person annually. For middle-class families, this represents an additional invisible yearly expense, directly squeezing funds available for other consumption or investment. For businesses, these costs compress profit margins, forcing them to cut investments, lay off workers, or raise prices.

Structure of the Distribution of Trump Tariffs’ Costs

U.S. consumers and businesses bear: 96% (about $192 billion)

Foreign exporters bear: 4% (about $8 billion)

Main effects: decreased domestic purchasing power, squeezed corporate profits, reduced trade volume

Secondary effects: supply chain shifts, foreign exporters reducing exports to the U.S.

This asymmetric cost distribution completely overturns the propaganda logic of Trump’s tariff policy. Politically, it’s claimed “let foreigners pay,” but the economic reality is “Americans pay the bill.” This gap between perception and reality significantly underestimates the true cost of tariffs.

How Tariffs Quietly Consume Crypto Market Liquidity

Cryptocurrency markets rely on freely available liquidity. When households and businesses are confident enough to invest idle funds, crypto markets rise. Trump tariffs gradually deplete this excess capital. Consumers pay more. Businesses bear higher costs. Cash available for speculative assets diminishes.

This helps explain why cryptocurrencies did not crash after October but also did not continue rising. The market entered a liquidity plateau rather than a bear market. The October decline reduced leverage and halted ETF capital inflows. Normally, easing inflation might rekindle risk appetite. Conversely, Trump tariffs keep the financial environment tight. Inflation remains high. The Fed stays cautious. Liquidity does not expand.

As a result, crypto prices stagnate. The market shows no panic but also lacks upward momentum. This “neither dead nor alive” state is typical of liquidity being quietly drained. Investors are neither panicked enough to sell nor have enough idle funds to buy more.

Looking at capital flows, when disposable income is squeezed by tariffs, households first cut non-essential spending and high-risk investments. As a high-risk asset class, cryptocurrencies are naturally among the first affected. For companies, when profits are squeezed by tariffs, their finance departments manage cash flow more cautiously, reducing allocations to volatile assets. This micro-level tightening of funds accumulates into macro-level market stagnation.

More critically, psychological effects come into play. When people feel their cost of living is rising (even if unaware of the specific cause), risk appetite declines. This cautious sentiment manifests in investment behavior—reducing leverage, cutting new investments, increasing cash holdings. As a risk-sensitive indicator, crypto markets keenly sense this emotional shift.

Mild Inflation but Declining Purchasing Power: A Paradox

(Source: Truflation)

By 2025, U.S. inflation is expected to remain relatively stable. Some conclude that Trump tariffs have had minimal impact. However, a study cited by The Wall Street Journal shows that only about 20% of tariff costs are passed on to consumer prices within six months. The rest are absorbed by importers and retailers, squeezing profit margins.

This lagged transmission explains why inflation remains mild while purchasing power quietly declines. The pressure builds gradually rather than through explosive growth. CPI (Consumer Price Index) may not show sharp increases, but indirect effects—such as declining corporate profit margins, slowing wage growth, and a softening labor market—gradually erode actual purchasing power.

This “boiling frog” effect is especially evident in the crypto market. There’s no panic selling because no obvious crisis signals appear. But there’s also no strong rebound, as the incremental capital supporting gains is drying up. Investors sense the environment is changing but cannot pinpoint the cause, leading to a cautious, wait-and-see attitude.

From a macroeconomic transmission perspective: Trump tariffs increase import costs → corporate profits are squeezed → companies reduce investment and hiring → wages slow or unemployment rises → household disposable income declines → investment in risk assets decreases → crypto liquidity shrinks. Each link takes time to manifest, so the full impact of tariffs often appears months or even a year later.

October was a critical turning point. When Trump announced threats of 100% tariffs on China, it triggered a sharp sell-off in crypto markets. Although this extreme tariff was not fully implemented, it already damaged market confidence. Since then, no new extreme tariff threats have emerged, but the tariffs already in place continue to quietly drain liquidity.

Market Turning Point After Easing of Trump Tariffs Pressure

Overall, new data on Trump tariffs alone cannot fully explain crypto volatility, but it helps clarify why markets remain subdued. Tariffs subtly tighten the financial system, deplete freely available capital, and delay risk appetite recovery. This silent cost consumption reduces available liquidity, helping explain why crypto markets stagnated after October rather than rebounded.

However, as tariff pressures ease and other adverse factors gradually subside, cryptocurrencies are beginning to regain momentum. Recently, Bitcoin rebounded from around $90,000 to over $95,000, indicating market adaptation to the current tariff environment. When new tariff threats (such as tariffs related to Greenland) appear, markets may react with short-term panic. But if tariff policies remain stable, markets could gradually recover.

Long-term, the impact of Trump tariffs on crypto markets may be phased. Initial (policy announcement) phase triggers panic selling; mid-term (cost transmission) leads to liquidity exhaustion and stagnation; late (market adaptation) could see risk appetite gradually return if no new tariff shocks occur. The current market may be transitioning from mid to late stage.

For investors, understanding the hidden effects of Trump tariffs is crucial. Mild inflation data may mask actual declines in purchasing power. In this environment, investment strategies should be more conservative: reduce leverage, increase cash reserves, focus on assets with strong fundamentals. Only when tariff policies stabilize or show substantial easing should risk exposure be increased.

From a policy perspective, if the U.S. government recognizes that the true domestic cost of tariffs is borne mainly by its citizens, it might reconsider the policy’s rationale. If future tariffs are adjusted or reduced, it could inject confidence into crypto markets by directly releasing suppressed liquidity. Investors should closely monitor any signals of changes in U.S. trade policy.