U.S. Tariffs Hit Home: 96% of the Costs Are Paid by American Consumers and Businesses

A new analysis shows that higher U.S. tariffs imposed over the past year have largely burdened the domestic economy. Roughly 96% of the additional costs were borne by American consumers and importers, not foreign producers. In effect, nearly all of the financial pressure remained within U.S. borders. A report by the Kiel Institute for the World Economy examines how global trade patterns shifted after tariffs increased. Researchers analyzed international shipments worth about $4 trillion between early 2024 and late 2025 to determine where the real costs ultimately landed.

Tariffs Push Up Prices for Everyday Goods in the U.S. By closely reviewing shipping records—from port departures and invoice changes to route diversions—the analysts found that foreign suppliers absorbed only a small share of the burden. Approximately 4% of the added costs were covered by exporters through modest price concessions. The rest was passed along the supply chain. The process unfolded gradually but effectively: higher border charges raised import costs, importers faced higher expenses, these increases flowed through distributors and retailers, and ultimately appeared on consumers’ receipts. The money did not flow in from abroad—it was redistributed within the United States, moving from households and businesses toward federal revenues. Economist Julian Hinz, who contributed to the analysis, noted that nearly $200 billion in tariff revenues collected last year was paid almost entirely by domestic buyers. While foreign firms made minor price adjustments, their contribution was minimal. The real impact was shouldered by U.S. households and importing companies, spreading across markets without meaningful relief.

Foreign Producers Cut Volumes Instead of Prices Rising tariffs did not trigger widespread price cuts. Instead, many foreign companies chose to reduce export volumes rather than sacrifice profit margins. When faced with the choice between discounting and shipping less, preserving profitability prevailed. This pattern was especially clear in trade with India. Indian exporters kept prices steady, but shipments to the U.S. fell by 18–24% compared with flows to Europe, Canada, or Australia. The decline reflected not weaker global demand, but the higher cost of selling into the U.S. market due to steeper tariffs, while other regions remained more price-stable. Exporters also leaned on alternative markets outside the U.S. and waited to see whether trade rules might ease. Deep discounts would have quickly erased margins, whereas cutting volumes offered greater flexibility amid uncertainty.

Long-Term Contracts Slow Trade Adjustments Another factor is the inertia of long-standing commercial relationships. U.S. importers are often bound by long-term contracts, making supplier changes costly and slow. As a result, foreign sellers had little incentive to cut prices for established customers; shipping fewer goods was the simpler option. The outcome is that the overall economic burden has not disappeared—it has shifted. Instead of being borne by foreign producers, it falls primarily on American consumers and businesses. The findings challenge the common assumption that tariffs are paid by overseas sellers. In practice, the data shows they are largely paid at home.

#usa , #TRUMP , #TrumpTariffs , #TradeWar , #Inflation

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