What's happened
Recent studies and interviews reveal that US consumers are absorbing the majority of tariffs imposed by the Trump administration, with estimates indicating they will shoulder over 55% of the costs by year's end. This shift is impacting household budgets and inflation, despite claims that foreign exporters would bear the burden.
What's behind the headline?
The true impact of Trump's tariffs is now clear: US consumers are paying the majority of the costs, not foreign exporters as initially claimed. According to Goldman Sachs, consumers will shoulder 55% of tariff expenses by the end of 2025, with companies absorbing only 22%. The Yale study confirms that import prices have increased by 4%, while domestic prices rose by 2%, indicating that sellers are partially absorbing costs but also passing some onto consumers.
This shift will likely lead to sustained inflation, with the Federal Reserve split on whether tariffs will cause lasting price increases. While some policymakers argue the inflationary effect will be short-lived, the evidence suggests that consumer prices will remain elevated, impacting household budgets and purchasing power.
Internationally, the increased costs are dampening demand for US exports, with European and Asian markets experiencing declines. The broader economic consequence is a potential slowdown in global trade, which could further weaken US economic growth. The tariffs' political rationale—to bolster manufacturing—may be undermined by these economic costs, raising questions about their long-term efficacy and fairness.
What the papers say
The Guardian reports that Americans are experiencing rising prices across a range of goods, with some households seeing their grocery bills increase significantly. The Guardian also highlights that tariffs have led to a $2,400 annual increase in household costs, contradicting the Trump administration's promises of lower prices. Meanwhile, The Japan Times emphasizes that US companies are bearing most of the tariff burden, passing costs onto consumers through higher prices, with import prices rising by 4%. Bloomberg adds that Goldman Sachs estimates US consumers will pay 55% of tariff costs by the end of 2025, with companies and foreign exporters sharing the remaining burden. The contrasting perspectives underscore that, despite claims of foreign cost absorption, the economic reality is that American households are paying the highest price, fueling inflation and economic strain.
How we got here
Since President Trump announced tariffs targeting China and other countries, concerns have grown about their economic impact. While the White House claimed foreign exporters would absorb most costs, research shows US companies and consumers are bearing the brunt. Studies from Yale and Goldman Sachs highlight rising prices and shifting costs, with import prices increasing and inflationary pressures mounting. The policy aims to protect US manufacturing but is causing higher consumer prices and potential slowdown in exports.
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