NEW DELHI: A study published in January 2026 by the Kiel Institute for the World Economy concludes that the sweeping United States import tariffs imposed in 2025 produced a self-inflicted economic cost. Rather than forcing foreign exporters to shoulder the burden, the tariffs operated as a levy on American buyers, functioning in effect as a selective consumption tax.
The policy brief, “America’s Own Goal: Who Pays the Tariffs?”, authored by Julian Hinz, Aaron Lohmann, Hendrik Mahlkow and Anna Vorwig, draws on shipment-level evidence covering nearly $4 trillion in trade and more than 25 million consignments. Its central finding is stark: for every $100 in tariff revenue, around $96 is paid by American buyers, while only $4 comes from reduced foreign exporter margins.
The conclusion rests on econometric estimates showing that exporter prices respond only marginally to tariffs. Across the full dataset, the estimated price elasticity of exportables with respect to tariffs is close to zero. Adjustment instead occurs through quantities. Shipment values, weights, and volumes fall sharply after tariff increases, while unit prices remain largely unchanged.
India provides one of the clearest demonstrations. The Indian tariff shock was sharp and discrete. A 25 per cent duty imposed in early August 2025 was raised to 50 per cent by month-end, one of the most abrupt trade interventions in recent history. Using FOB prices at Indian ports, the study compares exports to the United States with shipments to the European Union, Canada, and Australia, which imposed no new tariffs.
Export prices to the US did not decline, but export values and quantities fell by roughly 18-24 per cent relative to other destinations. Indian exporters chose retrenchment over discounting, redirecting supply rather than cutting margins in the US market.
US customs receipts increased by roughly $200 billion in 2025, but the gain was drawn almost entirely from American businesses and households. Exporters across India, China, Brazil, and Russia largely held prices steady, allowing volumes, not margins, to absorb the shock.
Together, the India and Brazil cases anchor the study’s broader findings. When tariffs are large, exporters do not erode margins to preserve market share. They cut shipments, redirect supply, and accept reduced access. Several factors explain this response, including limited scope for price cuts, alternative markets, sticky supply chains, and expectations of temporary tariffs.
The evidence is unusually granular. Each shipment is matched to the exact tariff rate on the day of US entry, isolating tariff effects from global price swings or seasonal demand. China shows the same pattern, with prices holding and volumes adjusting. Consumers pay more, choice narrows, supply chains weaken, and losses exceed receipts through deadweight costs. Factories slow and hours shrink.
Policy Implications
A report says tariffs are a tax on Americans. The claim that foreign countries “pay” for US tariffs is empirically false. With approximately 96% pass-through, nearly all the tariff burden falls on American importers and, ultimately, consumers. The $200 billion surge in customs revenue represents $200 billion extracted from American businesses and households
Tariffs do not transfer wealth from foreigners to Americans. They transfer wealth from American consumers to the US Treasury. This is economically equivalent to a consumption tax—but one that applies selectively to imported goods, creating additional distortions
Trade volumes adjust, not prices. The primary effect of tariffs is to reduce imports, not to force foreign producers to accept lower prices. This means fewer goods, less variety, and disrupted supply chains