Who bears the burden of Trump’s tariffs? The American consumer, according to new study

On April 2, 2025, Trump announced that all US trading partners would face a “baseline” 10% tariff, and country-specific “reciprocal tariffs.” Currently, Brazil and India face the highest US tariffs, 50% each, on their exports to the US.

Over the past week, the US President has reignited this trade war, announcing 10% tariffs against Greenland and members of the European Union for rejecting his territorial claims over the Danish territory, effective February 1, which would be increased to 25% on June 1. Trump also threatened 200% tariffs against France for preparing to reject an invitation to the proposed Board of Peace, a body mandated to oversee the peace process in Gaza.

Here are the main takeaways from the report:

The tariff burden is virtually a consumption tax on American buyers.

Trump’s escalating tariff announcements have rested on a singular premise: that tariffs can be deployed to extract concessions from trading partners, and “return” money to the US, at no cost to American households.

However, the tariff burden has effectively translated into a distorted consumption tax on Americans, which selectively targets imported goods. American importers and the final consumer bear 96%, while the rest is by foreign exporters, according to the study.

Using high-frequency, shipment-level data covering over 25 million transactions and nearly $4 trillion in trade value, the study found that US customs revenue increased by about $200 billion in 2025. However, foreign exporters did not reduce their prices in response to tariffs, transferring nearly the entire tariff burden to American importers, and thus the US consumer.

This means the additional customs revenue came almost entirely from the wallets of domestic consumers. “Every dollar of tariff revenue represents a dollar extracted from American businesses and households,” the study says.

Exporters did not lower prices, only reduced trade volumes in response to tariffs.

Tariffs are conventionally used to restrict imports by increasing their prices, presumably to make domestic alternatives competitive, or to otherwise add to government revenue. However, in the face of Trump’s escalating tariff announcements in his second term, exporters worldwide chose not to absorb the tariff into their prices, but lowered their export volumes instead. The result? Fewer, similar goods.

American firms using foreign-sourced inputs are among the worst affected, with immediate disruptions to their supply chains from reduced volume and increased costs. They must choose to absorb these costs and reduce profits and investment, pass them to customers and thus increase the final price, or find alternative sources and incur adjustment costs and delays.

This finding is especially true of Brazil and India, the two most-tariffed nations currently.

The US slapped 50% tariffs on imports from Brazil on August 6, 2025, and a 25% tariff on imports from India later that month, doubling it days later on August 27.

Exporters from both nations did not “eat” the tariff, meaning they did not lower their prices to offset the additional tariff burden, but reduced their export volumes sharply.

The report compared Indian exports to the US against Indian exports to the EU, Canada, and Australia, all regions that did not announce new tariffs on Indian goods during this period. It found that exports to the US remained unchanged compared to other destinations. However, Indian exports to the US fell by approximately 18-24% relative to other destinations, and quantities by similar magnitudes.

“We compared Indian exports to the US with shipments to Europe and Canada and identified a clear pattern,” Hinz said in a policy brief accompanying the report. “Both export value and volume to the US dropped sharply, by up to 24%. But unit prices—the prices Indian exporters charged—remained unchanged. They shipped less, not cheaper.”

Presence of alternative markets, sticky supply chains may be responsible for unchanged prices.

Exporters facing US tariffs could choose to reroute their product to markets in Europe, Asia or other destinations, and thus not have to reduce their prices. Similarly, the unpredictability of the tariff announcements could have given exporters less of an impetus to adjust their prices in response.

The practicality of making such changes is also a factor: For countries like Brazil and India which face a 50% tariff, exporters would need to cut their prices by a third, a massive cut to their margins which would be unacceptable for most firms.

The unviability for American importers to find alternative sources – fast – also grants suppliers pricing power. Thus foreign exporters face less pressure to cut prices.

The results mirror a similar situation in 2018-19, the last time Trump launched a trade war with China.

Studies that analysed the impact of Trump’s trade war with China in 2018-19, saw a similar outcome. US consumers almost entirely bore the brunt of Trump’s tariffs on imports from China. Chinese exporters did not reduce their dollar prices to maintain market share, but reduced their trade volumes.

The present study referred to this period and identified three key reasons for this outcome then: the lack of close substitutes for the tariffed goods, the capacity constraints on Chinese exporters that meant they could not export elsewhere, and the stickiness of supply chains, making it difficult for US importers to immediately find new suppliers.