A recent study by the Kiel Institute for the World Economy, published by Bloomberg, has shown that the tariffs imposed by the administration of President Donald Trump have turned into a “consumption tax” borne by American citizens and companies, rather than a means of financial pressure on foreign trading partners.
Shifting the Burden Inward
The study refuted the political idea that foreign exporters bear the cost of tariffs, as the data showed that American importers and their domestic customers pay “almost entirely” the value of these tariffs. According to the results, foreign companies bore only 4% of the financial burden, while the remaining 96% was passed directly to the buyer within the United States.
A $200 Billion Consumption Tax
The researchers described these fees as functioning as an “undeclared consumption tax,” noting that the increase in U.S. customs revenues, which amounted to about $200 billion, was actually deducted from the budgets of American families and companies.
The report confirmed that foreign exporters did not lower their prices in response to these increases, but rather maintained their profit margins, which left retailers in America with two options: either raise prices on consumers or reduce their own profits.
International Models: Declining Quantities and Stable Prices
The study focused on specific cases such as Brazil and India, where their exports faced tariffs of up to 50%. The results showed that exporters in these two countries did not offer significant price concessions in dollars, but rather tended to redirect their goods towards alternative markets. The researchers concluded that adaptation to tariffs occurs through “declining trade volumes” rather than through price reductions, which makes protectionist policy fail to achieve its stated goal of burdening foreign countries with the cost of the trade dispute.
