An analysis found that Americans bore more of the expense from the "reciprocal tariff" the Donald Trump administration imposed on trading partners last year than foreign exporters did. It means a large part of the administration's tariff revenue ultimately came out of Americans' pockets.
Germany's Kiel Institute for the World Economy (IFW) said on the 19th (local time) in a report that after analyzing 25 million trade records totaling $4 trillion (about 5,913 trillion won), the share of tariff expense absorbed by foreign exporters was just 4%. The remaining 96% was passed on to U.S. importers and consumers, the analysis found.
According to the study, tariff expense is first levied on U.S. importers and wholesalers, and then the burden flows to manufacturers and retailers. These corporations must choose whether to absorb the tariff burden themselves or pass it on to customers. In the end, U.S. consumers are hit not only by higher prices for imports but also for U.S.-made products that use foreign intermediate goods.
One reason foreign exporters bore little of the tariff expense is diversification of sales destinations. Bloomberg said, "There are several reasons exporters do not shoulder a significant portion of the expense, one of which is the ability to divert sales to other markets." The Wall Street Journal (WSJ) reported, "Exporters may have found buyers in other countries, or they may be maintaining price levels for now on the view that the final tariff level will change."
The institute said, "Overseas exporters did not cut prices to a meaningful degree in response to the U.S. tariff increases," adding, "The increase in U.S. tariff revenue, which totals $200 billion (about 296 trillion won), is no different from collecting the same amount from U.S. corporations and households." Earlier, the federal government released a statement late last year that tariff revenue had surpassed $200 billion.
After the tariffs were imposed, countries' trade volumes with the United States also fell sharply. Indian exporters, who were hit with a high 50% tariff last Aug. due to trade with Russia, kept their export prices but reduced shipments to the United States by 18% to 24% compared with other trading partners such as the European Union (EU), Canada and Australia.
This analysis clashes with President Trump's past remarks. Since Apr. last year, President Trump has imposed various tariffs around the world and has said foreign corporations would absorb the tariff expense and would not trigger inflation in the United States. On that basis, he also asked the Federal Reserve (Fed) to cut interest rates.
However, the tariffs did not immediately lead to sharp inflation. That is because U.S. importers and retailers initially shouldered the tariff burden. According to research by Harvard Business School, six months after the tariffs were introduced, only about 20% was actually reflected in consumer prices, and most of the rest remained a burden on U.S. importers and retailers.
The institute said tariffs are closer to a "consumption tax" levied on Americans than a tax on foreign producers. Julian Hinz, an economics professor at Bielefeld University in Germany and a co-author of the study, said, "There is no transfer of wealth to the United States by foreigners in the form of tariffs."
The WSJ said the findings "run counter to one of President Trump's core claims" and "suggests he could be at a disadvantage in a rekindled trade war with Europe." President Trump recently said he would impose an additional 10% tariff starting on the 1st of next month on eight European countries that oppose the annexation of Greenland, a Danish territory, and analysts say the findings could become a liability in future tariff talks with European countries.