US tariffs backfire as $200 billion cost falls on American consumers, study finds

A comprehensive study by the Kiel Institute for the World Economy (IfW Kiel) has documented that the tariffs implemented by the US administration in 2025 under the “Liberation Day” initiative have backfired, hitting the American economy rather than foreign exporters as originally intended.

The research, which analyzed over 25 million shipment records valued at approximately $4 trillion, found that foreign exporters absorbed only 4% of the tariff burden. The remaining 96% was passed directly to US buyers.

The Institute described this phenomenon as a “near-complete pass-through” for American importers and consumers.

As a result of Washington’s policy, US customs revenues surged by approximately $200 billion in 2025. However, this sum did not come from foreign manufacturers; instead, it transformed into a tax levied almost entirely on American businesses and households.

Julian Hinz, Research Director at the Kiel Institute and one of the study’s authors, characterized the current situation as an “own goal.”

“The claim that foreign countries pay these tariffs is a myth,” Hinz stated. “The data shows the exact opposite: Americans are footing the bill.”

Exporters did not absorb costs, they reduced shipments

The report scrutinized the market dynamics triggered by the policy, which was announced on April 2, 2025, and is regarded as one of the most extensive tariff shocks in modern US history.

During a period where tariffs on China exceeded 100% in some sectors and additional duties ranging from 10% to 50% were imposed on other trading partners, foreign firms notably did not lower their prices to maintain market share.

Case studies focusing on Brazil and India confirmed this trend with concrete data. In August 2025, sudden tariff increases were applied—50% on Brazilian products and between 25% and 50% on Indian goods.

Customs data revealed that Brazilian and Indian exporters did not lower their dollar-denominated prices, meaning they did not “swallow” the additional costs.

Instead of adjusting prices, they significantly reduced the volume of goods sent to the US.

Hinz noted that they compared Indian export data with shipments to other markets, such as Europe and Canada, leading to a clear conclusion:

“The value and volume of exports to the US experienced a sharp decline of up to 24%. However, unit prices—the rates demanded by Indian exporters—remained unchanged. They didn’t sell for less; they simply sold less.”

Supply chain rigidity and alternative markets

The research also sought to explain why foreign exporters refused to cut prices.

According to the analysis, while the US is a massive market, it is not the only one. Exporters possess the capacity to redirect their products to alternative routes, such as Europe or Asia.

Furthermore, the study emphasized that the price cuts required to offset high tariff rates—such as 50%—were neither profitable nor sustainable for most firms.

Another critical factor highlighted in the study was the structure of supply chains. Many US importers maintain long-term relationships with foreign suppliers and cannot easily switch sources in the short term.

This dynamic provided existing suppliers with pricing power while reducing competitive pressure. Consequently, rather than acting as a tax on foreign producers, the tariffs functioned as a consumption tax on US citizens.

The Institute concluded that this policy did more than just drive up prices; it reduced product variety for the American consumer and caused costly disruptions across global supply chains.