Study Reveals US Importers and Consumers Absorb Nearly Full Cost of Trade Tariffs

2026-01-20 economy

Kiel, Monday, 19 January 2026.
New data indicates foreign exporters absorb only 4% of tariff costs; the remaining 96% falls on US importers, effectively functioning as a direct tax on the American economy.

The Economic Reality of “America’s Own Goal”

Contrary to the political narrative that foreign nations pay the price for aggressive trade policies, a comprehensive study published in January 2026 by the Kiel Institute for the World Economy provides evidence that the financial reality is starkly different [1][2]. The research, titled “America’s Own Goal: Who Pays the Tariffs?”, concludes that 96 percent of the tariff burden is borne directly by United States importers and consumers, effectively functioning as a domestic consumption tax rather than a penalty on foreign exporters [1][5]. While the United States government collected approximately 200 billion USD in additional customs revenue in 2025, the study argues this figure represents wealth extracted from American businesses and households rather than foreign entities [1][3][6]. Julian Hinz, Research Director at the Kiel Institute, explicitly describes the tariffs as an “own goal,” stating that the claim of foreign countries paying the bill is a “myth” [1][4].

Analyzing the Data: A “Consumption Tax”

The study’s conclusions are drawn from a massive dataset covering the period from January 2024 through November 2025, analyzing approximately 25.6 million single-product shipments with a declared value of nearly 4 trillion USD [3][7]. Through this granular analysis, researchers determined that foreign exporters absorb only about 4 percent of the tariff costs [3][4]. Consequently, the remaining 96 percent of the burden is passed through to American buyers [3][5]. The data reveals that a 10 percentage point increase in tariffs results in a negligible 0.39 percent reduction in export prices from foreign firms [3]. For example, if the US imposes a 25 percent tariff, the price paid by US importers rises by approximately 24 percent, while the exporter’s price drops by less than 1 percent [3]. This transfer of cost has led analysts to characterize the tariffs as a consumption tax that squeezes corporate margins and drives up consumer prices [2][7].

Case Studies in Trade Volume vs. Price

The report highlights specific tariff shocks in 2025 to illustrate this dynamic, particularly regarding trade with Brazil and India [1][3]. In August 2025, the United States raised tariffs on Brazilian imports to 50 percent and increased duties on Indian imports from 25 percent to 50 percent [1][3]. The market response was immediate: rather than lowering prices to maintain market share, exporters in these nations simply reduced their shipment volumes [2][3]. Specifically, following the August hikes, export values from India to the US dropped by between 18 and 24 percent, yet unit prices remained unchanged [3][7]. This indicates that when faced with prohibitive duties, foreign producers prefer to exit the market or find new buyers rather than subsidize American tax revenue [4][8].

Geopolitical Tensions and Future Outlook

These economic findings come amidst escalating geopolitical friction. On Saturday, January 17, 2026, President Donald Trump threatened to impose a new 10 percent import tax on eight European nations, ostensibly in response to resistance regarding his proposed takeover of Greenland [2][7]. These new measures are scheduled to take effect on February 1, 2026 [7][8]. While the White House maintains that these strategies protect global security and that inflation has cooled from previous highs, the Kiel Institute warns that such policies ultimately disadvantage all parties [1][7]. As the February deadline approaches, the data suggests that any new levies will likely follow the established pattern: higher costs for American residents and a reduction in the variety of goods available in the domestic market [4][8].

Sources

Trade Policy Import Tariffs