The Truth About Tariffs: How American Consumers Paid for Trump's Trade War
22/01/2026
The annual spectacle of the World Economic Forum in Davos has once again commenced, yet this year's atmosphere carries a distinct tone. As global political and business leaders gather in the Swiss Alpine town, the venue is shadowed by former U.S. President Trump's controversial remarks regarding Greenland and renewed tariff threats. The Republican, who has declared his candidacy for the 2028 election, is attempting to pressure European nations into concessions on Greenland by escalating import tariffs. However, recent research unveils a long-overlooked reality: the true bearers of these tariffs are not foreign exporters, but American consumers and businesses themselves.
A policy brief released this week by the Kiel Institute for the World Economy, based on an analysis of over 25 million maritime transactions totaling nearly $4 trillion, has reached a startling conclusion: 96% of the costs of the broad tariffs implemented at the beginning of Trump's second term in 2025 ultimately fell on U.S. importers and consumers, with foreign exporters absorbing only about 4%. This means that out of the approximately $200 billion in tariff revenue collected by the U.S. government last year, $190 billion essentially came from the pockets of the American people.
The economic reality behind the data
Nearly complete cost pass-through.
The research team at the Kiel Institute adopted an unprecedented level of data granularity. They analyzed nearly two years of ocean bill of lading data from January 2024 to November 2025, which included precise daily import prices, weights, and quantities. The analysis revealed that after the implementation of tariffs, U.S. import prices increased almost one-to-one, while the offshore prices of foreign exporters remained largely stable.
This near-total cost-shifting phenomenon shatters the core argument of tariff proponents. Trump and his supporters have long claimed that tariffs are negotiation tools paid by foreign companies and governments, capable of increasing fiscal revenue and forcing trade partners to make concessions without harming Americans. However, research data paints a different picture: when tariffs are levied at the border, U.S. importers first bear this cost, which is then passed down through the supply chain to manufacturers, retailers, and ultimately reaches consumers.
Research indicates that in only about 4% of cases, European or other foreign exporters compensate for tariff increases by lowering prices. In the remaining 96% of cases, U.S. importers pay the additional fees and pass them on to customers—namely, American consumers. This pattern is further confirmed in case studies of tariffs on India and Brazil: after imposing a 50% tariff on Brazil and a 25-50% tariff on India in August 2025, export prices remained largely unchanged, while shipments to the United States declined significantly.
Rigid dependence in the supply chain.
Why can foreign exporters refuse to lower prices, while American importers have to accept higher costs? The research reveals several key factors.
American importers' reliance on specific European products exceeds expectations, with almost no alternatives available in the short term. European and Swiss exporters would rather reduce sales to the United States than lower prices. For many products, they have surprisingly quickly found other sales markets. This market adjustment capability weakens the leverage of U.S. tariffs.
The deeper issue lies in the structural characteristics of the global supply chain. Many American manufacturers rely on imported raw materials and intermediate products, and tariffs directly increase their production costs. These companies either absorb the costs (leading to reduced profits and investment) or pass them on to customers—who are also American consumers. As a result, American consumers face fewer product choices, reduced variety, and more disrupted supply chains, while foreign businesses are barely affected.
The nature of tariffs as a selective consumption tax.
The essence of fiscal transfers.
The report from the Kiel Institute describes tariffs as selective consumption taxes, whose essence is to transfer wealth from American consumers and businesses to the U.S. Treasury, rather than extracting concessions from trade partners. The report states: for every 100 dollars of tariff revenue collected, approximately 96 dollars come from the pockets of Americans.
The economic cost of such fiscal transfers extends far beyond the tariff revenue itself. Research highlights additional losses arising from distorted consumption, supply chain disruptions, and reduced product diversity. When tariffs lead to a decline in import volumes, American consumers not only pay higher prices but also face more limited choices, which diminishes overall economic welfare.
Historical comparison provides a broader perspective. Research indicates that these findings echo studies from the 2018–2019 U.S.-China trade war, when import prices rose almost in sync with tariffs, while exporter prices remained stable. Although the 2025 tariffs cover a wider range and have higher rates, the fundamental dynamics remain unchanged. This suggests that the economic effects of tariffs possess a certain universality, not limited by specific countries or product categories.
The Intertwining of Law and Politics
The tariff issue has evolved into a legal battle and is currently awaiting a ruling from the Supreme Court. Several major U.S. companies, including Costco, have sued the Trump administration, arguing that the implementation of tariffs is unlawful. The Supreme Court is expected to issue a ruling this year, which could pave the way for U.S. companies to receive substantial refunds.
This legal battle reflects deeper tensions within the U.S. political system regarding the authority over trade policy. Historically, the power to impose tariffs belonged to Congress, but the Trump administration expanded the executive branch's tariff authority through justifications such as national security. Most Republican lawmakers reluctantly supported this argument, enabling Trump to continue advancing his tariff agenda.
The Dilemma in Europe and the Chain Reaction in the Global Economy
The Dilemma of European Enterprises
Although European companies do not have to pay tariffs directly, they are facing equally tough situations. With limited export options, exports to the United States in multiple industries have significantly declined, leading to reduced production and the implementation of short-time work. If Trump imposes new, more comprehensive tariffs on individual EU countries due to the Greenland dispute, similar impacts will intensify.
For export-oriented economies like Germany, research predicts that potential new tariffs could lead to a decline in economic output by up to 1% of GDP. This shock not only affects corporate profits but also impacts employment and market confidence.
The Paradox of Retaliatory Measures
Facing tariff pressure from the United States, should the European Union take countermeasures? An analysis by the Kiel Institute raises a pointed question: Beyond prestige, can the EU gain more benefits from imposing retaliatory tariffs on the U.S. than the harm caused to American citizens by Trump's own tariffs?
Many analysts believe that the potential European response should target capital flows, possibly even U.S. securities. European countries hold $8 trillion in U.S. bonds and stocks, nearly double the combined holdings of the rest of the world. A natural question arises: Is it reasonable to invest so much in an economy that feels under attack?
However, this solution also comes with losses, particularly for the seller. The real dilemma is: Can you defeat a bully without harming yourself, or at least make them take you seriously? The answer is not simple.
The Future of Trade Policies and the Global Economic Order
The Shattering of Myths and the Choices of Reality
The report title from the Kiel Institute, "America's Own Goal: Who Pays the Tariffs?" aptly summarizes the research findings. The report clearly concludes that the claim of foreigners paying U.S. tariffs is largely a myth, warning that such policies increase costs for domestic businesses, harm consumers, weaken supply chains, and fail to deliver the promised economic benefits.
This understanding poses a challenge for policymakers. If tariffs are primarily borne by domestic citizens, their effectiveness as a negotiation tool becomes questionable. A more fundamental issue arises: in a globalized economy, can unilateral trade measures still achieve their intended goals?
The necessity of data-driven decision-making.
The research methodology of the Kiel Institute deserves special attention. By analyzing tens of millions of transaction data points, researchers are able to track the transmission path of tariffs with unprecedented precision. This data-driven approach sets a new standard for trade policy analysis and highlights the importance of evidence-based policy-making.
In an era where political rhetoric often obscures economic realities, such research provides a crucial corrective perspective. They remind us that the impacts of trade policies are complex and multifaceted, and that simplistic solutions often lead to unintended consequences.
Trump's tariff experiment provides a natural experiment that reveals the mechanisms of cost transmission in the global economy. As the 2028 election approaches, trade policy will undoubtedly become a focal point of debate once again. Research from the Kiel Institute offers a crucial factual foundation for this debate: regardless of political rhetoric, economic laws ultimately determine who truly pays the tariffs.
In today's increasingly interconnected global economy, the costs and benefits of unilateral trade measures require more careful weighing. The data has spoken: during Trump's tariff war, American consumers and businesses bore the vast majority of the costs. This reality is not only about economic efficiency but also about political accountability—when policy costs are primarily borne by a nation's own citizens, policymakers need to more honestly confront the true impact of their policies.
As the Supreme Court's ruling is about to be announced and a new election cycle begins, U.S. trade policy stands at a crossroads. The Kiel Institute's report reminds all participants: there is no free lunch in trade matters, and the bill always arrives eventually. The question is, who is willing to open the envelope to see the exact amount and take responsibility for it.