President Donald Trump’s duties on imported goods are paid almost entirely by American importers, their domestic customers and ultimately US consumers, a study from a German think tank concluded.
“Foreign exporters did not meaningfully reduce their prices in response to US tariff increases,” a report released Monday by the Kiel Institute for the World Economy said. “The $200 billion surge in customs revenue represents $200 billion extracted from American businesses and households.”
The study found that only about 4% of the tariff burden is shouldered by foreign firms, with a “near-complete” pass-through of 96% to US buyers that pay the levies and then must either absorb them or raise selling prices. Manufacturers and retailers are next in line in deciding whether they’ll pass along their higher costs or deal with tighter margins.
“The tariff functions not as a tax on foreign producers, but as a consumption tax on Americans,” Kiel researchers Julian Hinz, Aaron Lohmann, Hendrik Mahlkow and Anna Vorwig wrote.
The research zeros in on Brazil and India, whose exports were targeted with steep, broad US tariffs last year. After a 50% duty took effect, Brazil’s exporters “did not substantially reduce their dollar prices.” A similar pattern was seen with India, which first faced a 25% that was raised weeks later to 50%.
Several reasons exist why exporters don’t foot much of the bill, including their ability to redirect sales to other markets.