A study by the German Kiel Institute for the World Economy finds that nearly all costs of US tariffs on imported goods are borne by domestic buyers and consumers rather than foreign exporters. Researchers concluded that only about 4% of the tariff burden is absorbed by foreign companies, resulting in a “near-complete” 96% pass-through to US importers and households.
The study, released Jan. 20, analyzed trade flows from Brazil and India—countries whose exports were subject to substantial US tariffs in 2025. “Foreign exporters did not significantly lower their prices in response to US tariff hikes,” the report states. “The US$200 billion increase in customs revenues represents US$200 billion extracted from US companies and households.”
Brazilian exports, initially subject to a 50% US tariff, showed minimal changes in dollar-denominated prices. Indian exports first faced a 25% tariff, which rose to 50% weeks later, yet exporters largely maintained pricing levels. Researchers attribute this behavior to exporters’ ability to redirect goods to alternative markets rather than absorb higher costs. “The adjustment occurs through reduced trade volumes, not price concessions,” the report notes. “Faced with the choice of maintaining margins with lower sales or reducing margins to sustain volume, most exporters apparently prefer the first option.”
The Kiel study examined approximately 25 million transactions worth nearly US$4 billion, providing a robust dataset for analysis. The findings challenge claims by the Trump administration that foreign producers bear the cost of tariffs. “This assertion has been central to justifying policy: tariffs are presented as a tool to secure concessions from trading partners and generate government revenue without imposing costs on US households,” the report states. “Our research shows the opposite: US importers and consumers carry almost the entire cost.”
The report also details the mechanism through which tariffs affect the US economy. Importers and retailers must decide whether to pass higher costs on to consumers or absorb them through tighter margins. “The tariff does not function as a tax on foreign producers, but as a consumption tax for US buyers,” the researchers conclude. While the study focuses on Brazil and India, its transaction-level methodology can be applied to other trading partners affected by US tariffs, offering a benchmark for assessing impacts on domestic consumption, business margins and supply chains.
The Kiel Institute’s findings align with other research showing that US consumers ultimately pay for tariffs. Studies from Harvard Business School and The Budget Lab at Yale reached similar conclusions, while analysts at Deutsche Bank and Bank of America noted in 2025 that Americans—not foreign exporters—are bearing the cost of tariffs on imported goods.
According to the researchers, US importers and wholesalers are the first to absorb tariff costs, followed by manufacturers and retailers, who must decide whether to pass those costs on to customers or accept lower margins. Ultimately, consumers face higher prices on both imported goods and US-made products that rely on foreign inputs, while tariff pressures have also contributed to reduced availability of certain goods in the US market.
Mexico’s Vehicle Exports Decline Amid Tariffs, Trade Uncertainty
Mexico’s automotive sector has also been affected by US tariffs and trade uncertainty. On a cumulative basis, vehicle exports totaled 3.16 million units during the first 11 months of 2025, marking a 1.63% year-on-year decline and the first cumulative drop in this period in five years.
The slowdown coincides with the year of the USMCA review, during which unresolved US tariffs on steel, aluminum, automobiles and heavy trucks continue to shape trade and investment decisions. These duties, imposed under Section 232 of US law during the Trump administration, remain a central concern for Mexican authorities and industry groups preparing for negotiations with Washington. Mexico’s central bank (Banxico) data show that the value of Mexican steel exports to the United States fell 12% between January and October 2025 compared with the same period in 2024, while exports of transportation equipment, including automobiles and trucks, declined 7%.
Mexican officials note that the USMCA automotive tariff system allows for discounts based on regional content. “The higher the integration of Mexico, the United States and Canada in a product, the lower the effective tariff rate,” Economy Minister Marcelo Ebrard said. While this mechanism provides an advantage over non-regional competitors, industry leaders argue it does not resolve the underlying issue.
Mexico’s automotive industry is entering 2026 with a strategic objective to preserve USMCA integration and push for the removal of Section 232 tariffs, which industry groups view as incompatible with a stable North American supply chain. The Mexican Automotive Industry Association (AMIA) has warned that tariffs create uncertainty and additional costs, complicating investment decisions for both manufacturers and suppliers.
Tariff pressures are already reflected in vehicle prices. Guido Vildozo, analyst, S&P Global Mobility, estimates that US car prices have risen by about 4%, while the cost impact for manufacturers ranges between 6% and 9%. “How much does it cost to finance that?” Vildozo said. “For a small or mid-sized brand, one month of financing these tariffs represents about US$200,000.”