The Impact of Tariffs on the American Economy
Nearly a year ago, the US administration under President Donald Trump implemented a large-scale and often unpredictable series of tariffs. These measures were presented as a way to strengthen the American economy, while other countries were expected to silently cover the costs.
A new comprehensive study, based on data from over 25 million import transactions totaling nearly 4 trillion dollars, may come as a surprise to those unfamiliar with how tariffs actually function. This is understandable, as the US government has long claimed that tariffs would enrich the nation.
However, the 200 billion dollars in additional tariff revenue collected last year came from a single source: the wallets of Americans.
Who Really Pays?
The study’s findings directly contradict claims that tariffs force foreign companies to foot the bill. Instead, researchers argue that tariffs function similarly to a consumption tax for Americans, raising prices and reducing the variety of goods in the US market.
The study, published by the Kiel Institute for the World Economy, a leading German think tank, found that American importers and consumers absorbed about 96 percent of the costs caused by the tariffs. Only four percent were covered by foreign exporters.
The claim that foreign countries pay these tariffs is a myth. The data shows the opposite: the bill is paid by Americans.
The researcher also separately noted in a comment to the Wall Street Journal that there is no such phenomenon as wealth transfer from foreigners to the US in the form of tariffs.
Exported Less, Not Cheaper
One of the most striking findings of the study is that foreign exporters largely refused to lower their prices in response to the US tariff hikes. Instead of supplying goods more cheaply, exporters began shipping less. This trend was observed following the sharp tariff increases in August 2025.
Imports from Brazil were hit with a 50-percent tariff, while rates for Indian goods increased from 25 to 50 percent. In both cases, export prices remained unchanged, while shipment volumes plummeted.
We compared Indian exports to the US with shipments to Europe and Canada and found a clear pattern. Both the value and volume of exports to the US dropped sharply – by up to 24 percent. But the per-unit prices charged by Indian exporters remained unchanged. They shipped less, not cheaper.
The Burden Shifted Inward
The conclusion is simple. Instead of forcing foreign manufacturers to absorb losses, the tariffs reduced trade volumes and passed the higher costs on to Americans. Importers faced shrinking margins, while consumers ultimately paid more at the register or faced a smaller selection of goods.
In short, the tariffs did not shift costs abroad. They shifted them inward. The policy turned out to be an “own goal,” which increased state revenue while implicitly taxing American businesses and households.
It is important to note that this balance may change over time. The study indicates that exporters could absorb a larger share of the costs if American brands can offer new competitive products. However, this will not happen overnight, so the current state is likely to persist for some time.
Despite the stated goals of protecting the national economy, the mechanism of tariffs has proven to be significantly more complex. The effect observed now more closely resembles internal taxation than an effective trade tool. This raises questions about the long-term consequences for consumer prices, inflation, and the competitiveness of American companies in the global market. Long-term economic strategies likely require a more nuanced approach that considers both domestic and external factors in the context of globalized supply chains.