Despite the Trump administration’s insistence that foreign nations are bearing the cost of its tariff policy, a new study has reaffirmed what economists had already been saying: Americans are the ones paying for the import tax.
A policy report by the German Kiel Institute for the World Economy found that American importers and their customers are paying 96% of Trump’s tariffs, while countries importing the goods only pay 4%. The report comes days after the Trump administration threatened to levy more tariffs, this time against eight U.S. allies, unless they reached a deal for the United States to buy Greenland.
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Who is paying for the tariffs?
The Kiel study found that prices in the U.S. rose “nearly one-for-one with tariffs.” At the same time, the amount of goods foreign nations exported into the U.S. fell.
“Exporters are not cutting prices to maintain sales,” researchers wrote, “instead, they are accepting reduced market share in the United States while maintaining their profit margins.”
The study’s findings show that a 10 percentage point increase in tariffs led to only a 0.39% reduction in export prices. This means if the Trump administration imposed a 25% tariff on a product, exporters would reduce their pre-tariff price by less than 1%. U.S. importers would pay the remaining 24%, according to the study.
In layman’s terms, the researchers said if about 96% of the tariff is passed on to U.S. consumers, then for every $100 in tariff revenue the government collects, $96 comes out of consumers’ pockets. Foreign companies only eat about $4 of those tariff costs.
“The claim that foreign countries ‘pay’ the tariffs is, at best, 4% true,” researchers wrote.
In fiscal year 2025, the U.S. raised $195 billion in tariff revenue. If you use the study’s findings, U.S. consumers paid about $187.2 billion, or about $758 per U.S. adult, last year.
One country the researchers looked at was India. They said that if India were absorbing costs, they would see their U.S.-bound prices fall compared to shipments to other markets, since those markets don’t have tariffs. However, U.S. prices remained unchanged relative to other countries.
Instead, Indian exporters responded to Trump’s tariffs by shipping fewer goods to the U.S. but keeping prices unchanged.
Researchers concluded that American consumers are the “ultimate bearers” of the tariff costs. They also said tariffs have other adverse effects on consumers, like companies reducing the variety of their goods because of supply chain disruptions.
“These ‘deadweight losses’ are pure economic waste — costs borne by Americans with no offsetting benefit,” researchers stated.
Why aren’t foreign companies absorbing tariff costs?
Researchers found four reasons why other countries haven’t reduced prices and, in some cases, pulled out of the U.S.
The first is that there are other alternative markets these countries can look to instead of the U.S. In India, export data showed the country maintained its prices across all destinations. This suggests India was able to find other buyers, according to researchers.
The second reason is that cutting prices might not help. Researchers said even if exporters cut prices, a 50% tariff is hard to overcome. They said it would require exporters to cut prices by a third, leading to prices most firms wouldn’t accept.
The third reason is that exporters won’t make costly price adjustments if they think a tariff is temporary or could be negotiated. They might also think cutting prices would invite more tariffs because they gave in to the tariffing country’s demands.
“Maintaining prices signals resolve and avoids a race to the bottom,” researchers said.
The final reason is supply chains are simply “sticky.” Many U.S. importers have long-standing relationships with foreign suppliers and can’t easily switch to alternative suppliers, according to researchers. This gives the existing supplier some power, as they know the U.S. importer can’t quickly find another competitor.
How have the tariffs impacted the US economy?
Before Trump imposed his tariffs, some economists believed they could send the U.S. economy into a recession, but this didn’t happen. Instead, the U.S. economy has eaten the tariffs remarkably well, defying many predictions. However, the tariffs still affect U.S. consumers.
For one, costs are going up. The Yale Budget Lab states that tariff-based price increases cost the average household $1,700 last year.
Other research has found that tariffs could actually lower inflation. According to the San Francisco Federal Reserve Bank, 2025’s large tariff increases could put downward pressure on inflation. The annual inflation rate in 2025 was 2.7%.
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The U.S. government is also making substantial revenue from the tariffs. Trump has publicly proposed several ideas for how he could use the money. One idea was to use the tariff revenue as a substitute for federal income tax. However, that plan would not work since the federal income tax provides the U.S. with $2.4 trillion.
Trump also has suggested a one-time $2,000 dividend for Americans. Tariffs alone could not afford that unless the U.S. went into debt, since his plan would cost $300 billion.
Those proposals could remain hypothetical if the Supreme Court rules Trump’s use of the International Emergency Economic Powers Act is unconstitutional.
Either way, Kiel researchers say the tariffs do give the federal government more money, but that money comes from Americans, not other countries.
“The 2025 tariffs function as a consumption tax on American businesses and households,” they wrote. “The $200 billion in additional customs revenue represents wealth transferred from Americans to the US Treasury, not from foreign producers.”
