ATLANTA - A new report from the Kiel Institute for the World Economy suggests Americans — not foreign countries — are paying almost the entire cost of President Donald Trump’s tariffs, according to Wall Street Journal.
Who is really paying
What we know:
The researchers looked at nearly $4 trillion worth of shipments coming into the United States and found that about 96% of tariff costs are being paid by American importers and consumers, while foreign exporters are covering just 4% by slightly lowering their prices.
That directly challenges the idea that tariffs are paid by other countries.
Here’s why: tariffs are taxes charged at the U.S. border. American companies pay them first when goods arrive. Those higher costs then move through the supply chain — to manufacturers, retailers and eventually shoppers — showing up as higher prices or fewer choices.
The study found that when tariffs went up, prices paid by U.S. buyers rose almost dollar for dollar. Foreign companies largely kept their prices the same. Instead of discounting their goods, many simply shipped less to the U.S.
That’s exactly what happened with India and Brazil in 2025. When the U.S. imposed tariffs as high as 50%, exporters didn’t cut prices — they reduced shipments. Indian exports to the U.S. dropped by as much as 24%, while prices stayed steady.
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So where did all that tariff money go?
What they're saying:
U.S. customs revenue jumped by about $200 billion last year. But compared to a $1.7 trillion federal deficit, that’s a small dent — and economists say that $200 billion didn’t come from foreign governments. It came from American businesses and households.
In effect, the report by the well-regarded German think tank says tariffs are acting like a consumption tax on Americans, not a penalty on foreign producers.
Similar research by Budget Lab at Yale and economists at Harvard Business School came to the same conclusion.
However, President Trump has repeatedly claimed that the tariffs will be paid for by foreigners.
Why don’t foreign companies just lower prices to keep selling here?
The researchers say many can sell their products elsewhere, and cutting prices enough to offset steep tariffs would wipe out profits. Others expect tariffs could change again and don’t want to set a precedent.
The bottom line
Tariffs may reduce imports and raise government revenue, but the evidence shows Americans are footing the bill — through higher prices, tighter supply chains and fewer choices — while foreign exporters largely hold their ground.
However, the report does say that the cost of U.S. tariffs could change over time if overseas exporters start absorbing more of the tab as the U.S. finds new product sources.
Why this matters to your wallet
Tariffs may sound like a tax on foreign countries, but economists say they function more like a tax on Americans. When import costs rise, businesses often pass those costs along through higher prices, fewer discounts or reduced product choices. Over time, that can mean you pay more at the store, even if the price increases don’t show up all at once.
What products are likely to be impacted
According to the Wall Street Journal, if there is a new round of tariffs related to the effort to acquire Greenland, they are most likely to impact luxury and specialty goods.
Those products include French wine and cheese, Norwegian salmon, Bank & Olufsen speakers, Legos, and brands like Leica, Louis Vuitton, Le Creuset and Hermes.
The new tariffs would be on top of existing tariffs, which are currently 15% for most goods from the European Union and 10% for most U.K. products.
Impact on inflation
Inflation data adds to the debate over tariffs and their economic impact. Consumer prices rose 2.7% last month, down slightly from 3% in January, but still above the Federal Reserve’s long-term 2% target, according to The Hill.
In December, Jerome Powell, chair of the Federal Reserve, said the president’s tariffs account for "most" of the recent inflation overshoot. Powell described the effect as likely a one-time price increase, though economists note that such increases can take time to fully show up for consumers.