By Brett Rowland | The Center Square
(The Center Square) – New research shows Americans are paying almost the entire cost of President Donald Trump’s tariffs, directly challenging his repeated assertion that foreign nations absorb the burden.
Nearly all tariff costs fall on American importers and consumers, underscoring that Americans – not foreign entities – are covering the expense, according to a report from the Kiel Institute for the World Economy, a German think tank.
“The claim that foreign countries pay these tariffs is a myth,” said Julian Hinz, research director at the Kiel Institute and one of the authors of the study. “The data show the opposite: Americans are footing the bill.”
The Kiel Institute report echoes similar studies conducted in the U.S., and reports from U.S. banks, economists and companies.
“The tariff functions not as a tax on foreign producers, but as a consumption tax on Americans,” the Kiel Institute authors wrote. “Every dollar of tariff revenue represents a dollar extracted from American businesses and households.”
The authors said that for every $100 in tariff revenue the U.S. government collects, $96 comes “out of American pockets” and $4 comes from lower foreign exporter profits.
The White House said foreign exporters will pay the cost of tariffs.
“The average tariff imposed by America has increased by almost tenfold under President Trump, and inflation has continued to cool from Biden-era highs,” White House spokesman Kush Desai told The Center Square. “The Administration has consistently maintained that foreign exporters who depend on access to the American economy, the world’s biggest and best consumer market, will ultimately pay the cost of tariffs, and that’s exactly what’s playing out.”
One reason exporters haven’t dropped prices could be that they think the tariffs won’t last, the Kiel Institute authors said.
“If exporters believe tariffs may be temporary or subject to negotiation, they have less incentive to make costly price adjustments,” the report noted. “Cutting prices in response to tariffs could set a precedent that invites further tariff increases in the future. Maintaining prices signals resolve and avoids a race to the bottom.”
Last October, Goldman Sachs economists projected that American consumers will pay 55% of the tariff costs, U.S. businesses will pay 22% and foreign exporters will pay 18%.
That same month, a study from Duke’s Department of Economics found that consumers ultimately paid more than the tariff cost on European wines during a 2019–21 trade dispute. The upshot was that Americans paid higher costs than the federal government collected in tariff revenue.
Not everyone agrees. Peter Navarro, a top trade adviser to Trump, said it comes down to bargaining power.
“Importers remit duties at the border, but who actually pays is determined by bargaining power, not paperwork,” he wrote in an op-ed in December. “In real markets, the burden falls on whoever can’t afford to lose access to the U.S. consumer.”
In November, the Congressional Budget Office changed some of its tariff projections after noting that foreign businesses were picking up about 5% of the cost of the tariffs through lower prices.
“We had previously projected that foreign exporters would not reduce their prices to offset increased tariff rates. We now project that foreign exporters will reduce their prices by an amount equivalent to 5% of the increase in tariff rate,” according to a CBO report.
Also in November, Trump issued an executive order exempting more than 200 food products from tariffs over concerns about higher grocery prices.
Trump has made tariffs a central part of his domestic and foreign agendas during his second term. Last April, Trump imposed import taxes of at least 10% on every U.S. trading partner. Since then, the president has suspended, changed, increased, decreased and reimposed tariffs under a 1977 law, the International Emergency Economic Powers Act.
A group of states and small businesses challenged Trump’s tariffs under the 1977 law, winning in two lower courts before the administration appealed to the Supreme Court. The high court agreed to hear the case on an expedited basis.