Trump tariffs weigh more on Americans than foreigners

Studies show that Trump’s tariffs impact companies and consumers, reversing the promise that foreigners would bear the costs

Os new taxes on imports from the United States are being felt directly by companies and consumers in the country, according to academic studies and recent research, challenging the president’s narrative Donald Trump that foreign countries would bear the cost of tariffs. The situation further complicates the efforts of the Federal Reserve to control inflation amid rising domestic prices.

Trump had predicted that foreign exporters would absorb the impact of tariffsmaintaining its share in the largest consumer market in the world, but the first months of application of the measures show a different scenario: American companies are bearing much of the costpassing on part of it to consumers, with the prospect of further price increases.

“Most of the cost appears to be borne by American companies,” he said. Alberto Cavalloa professor at Harvard University, in an interview about his findings. “We see a gradual repercussion in consumer prices and there is clear upward pressure.”

A White House spokesperson acknowledged that Americans may face a period of adjustment to tariffsbut reaffirmed that, in the long term, the cost would be borne by foreign exporters. According to the spokesperson, the companies would also be diversifying supply chains and bringing part of production to the US, as a way to reduce the impact of tariffs.

Who is paying the bill?

Cavallo, together with researchers Paola Llamas e Franco Vasquezmonitored the prices of 359,148 productsranging from rugs to coffee, sold at major online and physical retailers in the United States. The data shows that:

• Imported products stayed 4% more expensive since March, when tariffs began to be applied.
• National products were discharged from 2% in the same period.

The biggest increases occurred in products that cannot be produced domesticallysuch as coffee, or on items coming from countries most affected by tariffs, such as Turkey. Although the increases are significant, they were less than the total value of the ratesindicating that sellers absorbed part of the cost.

On the other hand, the study points out that foreign exporters have increased their prices in dollarspassing on part of the dollar’s devaluation against their currencies to American buyers.

“This suggests that foreign producers are not absorbing much of the U.S. tariffs, which is consistent with previous economic research,” highlighted researchers at think tank Budget Labfrom Yale University, in a blog post.

Export price indices confirm this trend: the cost of products exported by China, Germany, Mexico, Türkiye and India increasedbeing the Japan the only exception.

Impact on the economy

The survey shows that Trump’s trade policy, designed to put pressure on other countries, has ended transferring a significant part of the weight into the American economy itselfincreasing costs for companies and consumers and creating inflationary pressure at a time when the Fed seeks to maintain price stability.

With the dollar devalued against several currencies and international costs passed on to the US, consumers may face more price increases in the coming monthsas American companies try to balance profit margins and competitiveness in the global market.

Although it has already been felt by American businesses and consumers, the full effect of Donald Trump’s tariffs is still in the adaptation phase. The set of taxes on imports, which raised the average tariff from around 2% to approximately 17%, has not yet been fully consolidated in the market, and analysts estimate that the next few months will be decisive in understanding who really bears these costs.

“We shouldn’t expect this to happen just once, but rather that companies are trying to find ways to soften the impact” and extend price increases over time, he explained. Alberto Cavalloprofessor at Harvard University.

Some industries have already started to absorb part of the costs. European automakers, for example, have sought keep final prices stablewhile consumer companies, such as Procter & Gamble (Tide), EssilorLuxottica (Ray-Ban) and the Swiss watchmaker Swatchchose to pass the increases on to end customers. A survey of the Reuters showed that about 72% of companies monitored in Europe, Middle East and Africa have announced price increases since the start of Trump’s trade offensive, while only 18 companies warned about impact on profit margins.

Analytics on eCommerce platforms like Shein e Amazon have already shown significant price increases for Chinese products in the United States, ranging from clothing to electronics. At the same time, the Chinese policy known as “anti-involution”which encourages producers to reduce competition and limit production capacity in strategic sectors, can further increase pressure on pricesespecially critical assets such as solar energy equipment.

Inflationary pressure in the USA

The scenario points to a higher inflation in the United States. Despite the Federal Reserve Having cut the benchmark interest rate last month over concerns about a weakening labor market, officials are divided over whether tariff-driven inflation will ease over time.

The new Fed governor, Stephen Miranlinked to the Trump administration, downplayed the effect of the tariffs, stating that they are not inflationary and described the price changes as “relatively small changes to some products“However, a preliminary calculation of the Fed de Boston projected that tariffs could raise the core inflation at 75 basis points. The Fed president, on the other hand, Jerome Powellestimated that tariffs were responsible for 30 to 40 basis points in the last inflation reading of 2.9%, but considered that the effect would be “relatively short“.

O Peterson Institute for International Economics also assessed that, next year, inflation in the USA would be 1 percentage point higher due to tariffs, but the impact tends to fall again then.

Global trade and international tensions

As Americans face rising prices, the rest of the world also feels the impact. Demand for exports is expected to decline, reflecting higher costs for consumers, and research from S&P Global indicate that new export orders have been falling consistently since June.

As exports from the European Union to the USA retreated 4.4% in Julywhile in Germany there was a drop in 20.1% in Augustaccording to available data. THE As an Institutefrom Germany, also pointed to a downward trend in North American shipments. THE World Trade Organization revised its global trade growth forecast to just 0.5% next yearciting the delayed effect of American tariffs.

The Dutch bank ING projects that EU exports to the US could fall 17% in the next two yearsimpacting European GDP growth by around 30 basis points.

“The expected impact of US tariffs has not yet materialized,” he said. Ruben Dewitteeconomist at ING. “We anticipate these effects will become more visible in the coming months.”

The scenario shows that, although American consumers and companies already feel pressure, the true size of the effect of tariffs is yet to comewith possible repercussions on inflation, global trade and economic growth in the coming quarters.

With information from Reuters*