Exporters to US paying only 5% of Trump’s tariffs – ECB research

New research from the European Central Bank shows exporters are passing on most of the costs of president Donald Trump’s tariffs to US consumers.

In a bulletin published today (March 30), authors Stefan Schaefer, Lisa Gerland and Marcel Tirpák show that a 10% increase in the levies implies a 9.5% increase in prices for US consumers. 

They note that although the pass-through is “significantly lower when looking at specific factors”, there were no major differences between the US’s largest trading partners.

The researchers find that around a third of the tariff burden is being shouldered by consumers. When higher tariffs are expected to stay in place for longer, US firms are likely to pass more of the costs on to consumers.

“Over the longer term, this share could rise to over half as US firms exhaust their ability to absorb costs,” they write. “Additionally, if the extent to which exporters absorb tariffs remains limited in scope … this implies that US firms would absorb around 40% of higher tariff costs in the longer term.”

The tariffs have also had a “large” impact on trading volumes, with a 10% increase in levies resulting in a 37% decline in imports to the US. 

The researchers examine the automotive sector specifically. They find a surge in imports to the US from Canada and Mexico, while those from China, the European Union and Japan have declined significantly.