Study Reveals Americans Bear 96 Percent of Import Tariff Costs

2026-02-06 economy

Washington D.C., Friday, 6 February 2026.
Analysis of $4 trillion in imports reveals a stark reality: American businesses and consumers absorb 96 percent of tariff costs, debunking claims that foreign nations foot the bill.

The Myth of Foreign Payment

Contrary to the persistent political rhetoric suggesting that trade adversaries foot the bill for protectionist measures, data released in January 2026 paints a vastly different picture of the American economic landscape. A comprehensive policy brief by the Kiel Institute for the World Economy analyzed over 25 million shipment records—representing nearly $4 trillion in U.S. imports—and concluded that 96 percent of the tariff burden is absorbed by U.S. importers and consumers [1]. Foreign exporters, by contrast, shoulder a mere 4 percent of these costs [1]. This analysis serves as a quantitative rebuttal to claims that tariffs act as a levy on foreign nations; instead, they function effectively as a tax on domestic commerce, with the average U.S. household estimated to face an additional cost of $1,300 in 2026 due to these increases [5].

The Mechanics of the “Own Goal”

The economic transmission mechanism revealed by the study is straightforward yet punishing for the domestic supply chain. When the United States hiked tariffs on Brazilian imports to 50 percent and Indian imports from 25 percent to 50 percent in August 2025, the anticipated price concessions from foreign exporters did not materialize [1]. Julian Hinz, Research Director at the Kiel Institute, noted that while export volumes to the U.S. dropped by up to 24 percent, the unit prices charged by exporters remained unchanged [1]. Essentially, foreign partners shipped fewer goods rather than cheaper goods, leaving American companies to pay the difference. This aligns with broader economic data; between March and October 2025, prices of imported goods rose approximately 6.2 percent relative to pre-tariff trends [2]. Consequently, U.S. firms are facing shrinking margins while consumers grapple with higher prices, a scenario Hinz describes as an economic “own goal” [1].

Legal Challenges and Economic Fallout

As the economic toll becomes clearer, the legal framework supporting these tariffs faces imminent scrutiny. The Supreme Court is expected to issue a decision as early as this month regarding the legality of using the 1977 International Emergency Economic Powers Act (IEEPA) to impose these levies [3]. While the administration argues these measures are necessary for national security, critics, including former White House lawyer Ty Cobb, argue that “phony emergency declarations” are being used to bypass constitutional limits [3]. Should the Court strike down the IEEPA usage, the White House has prepared a “backup plan” involving other statutory authorities, such as Section 301 and Section 232, to maintain the tariff regime [3].

These legal battles are unfolding against a backdrop of mixed economic indicators. While inflation saw a modest decline of 0.3 0.3 percentage points from January to December 2025, settling at 2.7 percent, the unemployment rate ticked up to 4.4 percent by the end of the year [4]. Public sentiment reflects this strain; a poll released on Thursday indicates that 59 percent of Americans disapprove of the President’s handling of the economy, the highest disapproval rating recorded since he first took office in 2017 [4].

Shifting Alliances and Trade Adjustments

In a move that signals a potential recalibration of trade strategy, the administration announced on Monday, February 2, 2026, a reduction in the import tax on Indian products from 50 percent down to 18 percent [3][5]. This adjustment, described as a “harm reduction tool,” is projected to mitigate some economic damage but still leaves Indian GDP lower by 0.88 percent compared to a no-tariff scenario [7]. While the administration claims this deal will lead to zero tariffs on U.S. imports to India, the immediate reality for American commerce remains complex [7]. Even with this reduction, the overarching tariff policy continues to act as a significant drag on growth, with projections suggesting these measures could reduce U.S. GDP by 0.5 percent between 2026 and 2035 [5].

Sources

Trade Policy Import Tariffs