When the Trump administration imposed tariffs on various imports in 2018, the stated goal was to boost U.S. industries and punish foreign exporters. But rather than hurt foreign exporters, economic evidence shows that it is American businesses and consumers hardest hit by Trump tariffs. Tariffs have resulted in higher prices for a wide variety of products that American consumers and businesses buy. As the Biden administration maintains, or even increases, Trump tariffs, Americans will continue to face higher prices as a result.

When the United States imposes tariffs on imports, American businesses pay import taxes directly to the United States government on their purchases abroad. The economic burden of tariffs, however, could fall on other than American companies that pay the tax directly, including foreign companies selling goods to American companies (if foreigners lower their prices to absorb some of the costs. tariffs), or US consumers ultimately purchasing the tariffs. goods (if US companies increase their prices to reflect tariffs).

Historically, economists have generally found that foreign firms have absorbed some of the tariff burden by lowering their prices, meaning that domestic firms and consumers have not borne the full cost of the higher tariffs in the past. Unlike previous studies, however, new studies have found that Trump-Biden tariffs have been passed on almost entirely to US businesses or end consumers.

Economists Pablo Fajgelbaum, Pinelopi Goldberg, Patrick Kennedy and Amit Khandelwal examined the tariffs on washing machines, solar panels, aluminum, steel and products from the European Union and China imposed in 2018 and 2019. They found that US businesses and end consumers bore the full burden of tariffs and estimated a net loss to the US economy of $ 16 billion annually, of which over $ 114 billion was losses for businesses and consumers, offset by small gains for protected producers and revenue gains for the government.

Using a slightly different methodology, economists Mary Amiti, Stephen J. Redding, and David E. Weinstein also found an almost complete pass-through of tariffs, noting that “US tariffs continue to be almost entirely borne by businesses and consumers. Americans ”. Certain differences appeared according to the types of products. For example, for steel, the authors found that an initial pass-through of 100% fell to 50% one year after the tariff was applied. Foreign exporters, mainly to the European Union, South Korea and Japan, lowered their steel prices somewhat, but American businesses and consumers still paid more than they expected. would have done without the tariffs.

Also finding differences between products and timing, a study by economists Alberto Cavallo, Gita Gopinath, Brent Neiman and Jenny Tang looked at the retail prices that end consumers face for handbags, tires, refrigerators and bicycles at two major retailers. In the first few months after the tariffs, they didn’t observe any price change, but over time, and as the tariffs went from 10% to 25%, the prices of handbags and tires went up. quickly while the prices of refrigerators and bicycles did not seem to increase. deviate from previous trends. Overall, they found that a 10 percentage point tariff increase on a good increases the price of the good to end consumers by 0.44% after one year, compared to other goods in the sector. Their findings imply that retail companies absorbed a large portion of the tariffs initially in the form of lower profit margins rather than passing the higher costs on to American consumers. In part, the moderate price effects also reflect other distortions: firms build up inventories of key products when tariffs have been announced and divert orders to foreign firms not subject to tariffs.

In some cases, however, American companies over-shifted the weight of tariffs for end consumers. For example, a new article by economists Sebastien Houde and Wenjun Wang found that a $ 1 increase in solar panel tariffs increased the final price of an installed solar panel system by $ 1.34. The authors noted “[m]manufacturers and installers thereby shift the burden of commercial tariffs onto American consumers. Excessive transfer can occur when domestic firms have “market power”, which allows them to raise prices above costs and increase profits. Despite the higher prices, however, the US industry was no better off, as the authors noted that “US manufacturers have gained little from anti-dumping policies while US installers have been largely negatively affected … the solar trade war has resulted in significant welfare losses in both countries. and significantly slowed the adoption of solar photovoltaic energy.

Other research by economists Aaron Flaaen, Ali Hortaçsu and Felix Tintelnot found a similar lag effect with washing machine tariffs. They observed that the prices of washing machines had increased by about $ 86 per unit in the months following the tariffs and that the prices of clothes dryers had also increased by $ 92 per unit, although they were not. subject to tariffs. Their results were supported by Cavallo et al. study cited above, which found a significant increase in retail washer and dryer prices as a result of tariffs.

Most of the evidence shows that for most of the new tariffs imposed under the Trump administration, American businesses or consumers have borne 100% or more of the burden due to lower profits or higher retail prices. While a number of supply and demand factors are primarily responsible for current inflation rates, tariffs are certainly not helping. Leaving them there, or doubling them, will not relieve the pressure on consumers or businesses. Instead, American policymakers should give Americans a break and repeal tariffs.