Americans are paying the increased tariffs - Report refutes Trump's argument that taxes are paid by foreigners
Americans are bearing nearly all of the brunt of President Donald Trump’s import tax hikes, the New York Federal Reserve said. According to the report, 90% of the tariffs imposed by the president on imported goods are borne by American consumers and companies. The report contradicts the Trump administration’s argument that the tariffs are paid by foreigners.
The report assessed how tariffs affected the economy last year, when the average tariff rate went from 2.6% to 13%. The report noted that the average rate fluctuated throughout the year and peaked in April and May, when Trump raised tariffs on Chinese goods to 125% before lowering them back to 113%.
The authors based their analysis on how tariffs worked in Trump's first term. When faced with these types of taxes, "our past work found that foreign exporters did not lower their prices, so the full impact of the tariffs was borne by the U.S. That is, there was a 100% pass-through from tariffs to import prices," the report's authors say.
Between January and August of last year, Americans took 94% of the hit from Trump's tariffs. During September and October, the drop was 92%, stabilizing at 86% in November.
The New York Federal Reserve’s findings align with a report published by the Congressional Budget Office. According to the report, higher tariffs directly increase the cost of imported goods, raising prices for American consumers and businesses. When it comes to who will pay the tariffs, the CBO said foreign exporters will absorb 5% of the cost, and in the short term, “American businesses will absorb 30% of the increase in import prices by reducing their profit margins; the remaining 70% will be passed on to consumers by raising prices.”
Imposing high tariffs on imported goods is a cornerstone of the Trump administration's political regime. They are being used to raise revenue for the government and as a means to punish other nations that the president believes are taking advantage of the U.S., as well as a mechanism to bring industry back to the domestic market.
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