A new economic study has confirmed what many economists have long argued: American consumers, not foreign exporters, pay the cost of tariffs.
The research, reported by the Wall Street Journal, arrives at a critical moment as the Trump administration threatens sweeping new tariffs on European goods, Chinese imports, and now French wine.
The finding contradicts repeated claims from tariff advocates that foreign countries "pay" these trade barriers. In reality, tariffs function as a tax on imports—one that gets passed directly to American businesses and consumers through higher prices.
This isn't theoretical. During the 2018-2019 trade war, research from the National Bureau of Economic Research found that U.S. companies and consumers bore the "full cost" of tariffs, with no measurable decrease in foreign exporters' prices. American businesses paid $3 billion per month in additional taxes, costs that flowed through to retail prices.
The new study's timing is particularly relevant given the administration's latest threats. A 200% tariff on French wine wouldn't hurt France—it would make a $30 bottle of Bordeaux cost $90 at your local wine shop. French producers would simply sell elsewhere. American consumers and restaurants would pay more or do without.
The economic logic is straightforward: tariffs raise the domestic price of imported goods. Foreign sellers rarely lower their prices to compensate because they can sell in other markets. The result? Americans pay more for everything from washing machines to wine.
For businesses dependent on imported components—which describes most of American manufacturing—tariffs create a double squeeze. Input costs rise, forcing companies to either absorb lower margins or pass costs to customers. Neither option helps economic growth.
The irony is thick. Tariffs marketed as tools to protect American workers function as regressive consumption taxes that hit lower-income households hardest. A family buying a washing machine doesn't care whether the extra $100 they pay is called a "tariff" or a "tax"—it's $100 they don't have for other purchases.
Trade policy deserves serious debate. Strategic tariffs on specific goods for specific national security reasons can make sense. But pretending that foreign countries pay for broad tariff walls? The numbers don't lie, but executives sometimes do.
