{"id":143111,"date":"2026-01-21T13:45:07","date_gmt":"2026-01-21T13:45:07","guid":{"rendered":"https:\/\/www.newsbeep.com\/us-ca\/143111\/"},"modified":"2026-01-21T13:45:07","modified_gmt":"2026-01-21T13:45:07","slug":"hiltzik-trumps-tax-on-american-consumers","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/us-ca\/143111\/","title":{"rendered":"Hiltzik: Trump’s tax on American consumers"},"content":{"rendered":"\n

On Tuesday morning, all eyes on Wall Street seemed glued to the nearest screens in expectation that the Supreme Court would finally disgorge its opinion on the legality of President Trump\u2019s tariffs. <\/p>\n

It had been a long wait: The Court heard oral arguments on the issue Nov. 5, when questions from the justices suggested that a majority was prepared to strike the tariffs down. <\/p>\n

But the wait isn\u2019t over. No tariff decision came down Tuesday. With the Court about to start a four-week recess, that means that a ruling on the tariffs won\u2019t come before late February, leaving Trump\u2019s most impactful economic policy in limbo for at least another month.<\/p>\n

Tariffs do not transfer wealth from foreigners to Americans. They transfer wealth from American consumers to the US Treasury.<\/p>\n

\u2014 Kiel Institute for the World Economy<\/p>\n

But verdicts on the tariffs are flowing in from elsewhere, and from the standpoint of American consumers, they\u2019re ugly in the extreme. <\/p>\n

One finding comes from the Kiel Institute for the World Economy<\/a>, a respected German economic think tank. Contrary to Trump\u2019s insistence that the tariffs are paid by foreign countries \u2014 more precisely by their exporters \u2014 Kiel\u2019s study finds that the tariffs are almost entirely paid by American importers and their domestic customers. <\/p>\n

Get the latest from Michael Hiltzik <\/p>\n

In 2025, Kiel wrote, the $200 billion that the U.S. treasury collected from Trump\u2019s tariffs was tantamount to a $200-billion consumption tax on Americans. <\/p>\n

\u201cThe tariffs are, in the most literal sense, an own goal,\u201d Kiel\u2019s researchers wrote. \u201cAmericans are footing the bill.\u201d<\/p>\n

A second opinion may be even more frightening. It\u2019s that inflation is likely to take off in 2026, driven by tariffs and other ill-considered economic policies emanating from the Trump White House. That\u2019s the view of economists Peter Orzsag, chief executive of the investment firm Lazard; and Adam Posen, president of the Peterson Institute for International Economics<\/a>. <\/p>\n

\u201cInflation rising above 4 percent by the end of 2026 is not only plausible,\u201d they write, \u201cbut arguably the most likely scenario.\u201d That would be a big jump from the most recent government estimate of a 2.7% annual rate in December.<\/p>\n

The gist of the forecast by Orszag and Posen is that Americans were living in a dream world throughout 2025, when a muted inflation increase led even many experts to conclude that the Federal Reserve Board had \u201clargely won its inflation battle,\u201d notwithstanding higher tariffs.<\/p>\n

U.S. importers had absorbed most of the cost of tariffs through 2025, Orszag and Posen concluded. \u201cThat will change in the first half of 2026,\u201d they write. \u201cHistorical evidence shows that tariff pass\u2011through tends to be gradual, with consumer prices rising only as firms revise pricing with a lag.\u201d <\/p>\n

American importers were able to absorb tariff costs in part because they had stockpiled inventories in anticipation of the higher duties. Wary of imposing one-time price increases, businesses chose to raise prices in smaller steps and over a longer period, Orszag and Posen observe. But that relief is likely to be exhausted by the middle of this year.<\/p>\n

None of these findings has had any effect on the White House position on tariffs. <\/p>\n

\u201cThe average tariff imposed by America has increased by almost tenfold under President Trump, and inflation has continued to cool from Biden-era highs,\u201d White House spokesman Kush Desai told me by email. \u201cThe Administration has consistently maintained that foreign exporters who depend on access to the American economy, the world\u2019s biggest and best consumer market, will ultimately pay the cost of tariffs, and that\u2019s exactly what\u2019s playing out.\u201d<\/p>\n

Yet red lights are flashing as Trump intensifies his use of tariffs as an instrument of a personal foreign policy, almost entirely divorced from their traditional economic role in trade relations. <\/p>\n

Over the last week, Trump has threatened European countries with higher tariffs because of their efforts to thwart his determination to take over Greenland. On Monday, he threatened to impose 200% tariffs on French wines<\/a> because French President Emmanuel Macron balked at joining Trump\u2019s \u201cBoard of Peace,\u201d a body he proposes to address global conflicts.<\/p>\n

Let\u2019s take a closer look at the latest tariff analyses.<\/p>\n

The Kiel study was based on shipment records covering more than 25 million transactions valued at nearly $4 trillion, as well as on case studies of how Indian and Brazilian exporters responded to sharp tariff increases Trump imposed on those countries last year. <\/p>\n

The broader statistics, Kiel reported, indicated that 96% of all tariffs were passed through to Americans. As Kiel observed, by claiming that foreign countries pay tariffs, Trump was able to frame them as \u201ca tool to extract concessions from trading partners while generating revenue for the US government \u2014 at no cost to American households.\u201d<\/p>\n

The truth is that American consumers and importers bore 96% of all the costs, Kiel calculated. That\u2019s not a novel phenomenon. As the Kiel study noted, during the 2018-19 US-China trade war \u2014 also instigated by Trump \u2014 \u201cUS import prices rose nearly one-for-one with the tariffs, while Chinese export prices remained largely unchanged.\u201d<\/p>\n

With the latest round of tariff increases, Kiel found, exporters have not cut prices to maintain sales,\u201d which would be tantamount to their paying the tariff costs. Instead, foreign exporters \u201care accepting reduced market share in the United States while maintaining their profit margins.\u201d<\/p>\n

That was notably the case with India, where the value and quantity of exports to the U.S. fell by as much as 24% relative to other export destinations after Trump hit India with a 25% tariff Aug. 7 and raised it to 50% later in the month. \u201cIndian exporters responded to US tariffs by shipping less, not by cutting prices.\u201d<\/p>\n

The Kiel researchers conjectured that exporters didn\u2019t absorb the tariff costs for three main reasons. First, they had recourse to alternative markets such as Europe and Asia: \u201cThe United States is a large market, but it is not the only market.\u201d<\/p>\n

Second, the tariffs were so large that cutting prices to absorb them would make many exports unprofitable. \u201cGiven the choice between maintaining margins on reduced sales or slashing margins to maintain volume,\u201d the Kiel researchers wrote, \u201cmost exporters apparently prefer the former.\u201d<\/p>\n

Finally, many U.S. importers did not have a choice in sourcing goods. That gave existing exporters the upper hand: Exporters know that U.S. importers can\u2019t easily find alternative suppliers, \u201cso they face less competitive pressure to cut prices.\u201d<\/p>\n

Tariff costs percolate through to American consumers in numerous ways \u2014 through higher prices on imported goods, higher prices on domestic goods produced with imported parts and a narrowed variety of goods on the shelves. Meanwhile, importers have to shoulder the cost adjusting to tariffs by seeking out untariffed suppliers.<\/p>\n

\u201cThese \u2018deadweight\u2019 losses are pure economic waste,\u201d the Kiel researchers concluded \u2014 \u201ccosts borne by Americans with no offsetting benefits.\u201d <\/p>\n

In sum, \u201ctariffs do not transfer wealth from foreigners to Americans. They transfer wealth from American consumers to the US Treasury.\u201d Think about that when Trump or Cabinet members such as Commerce Secretary Howard Lutnick or Treasury Secretary Scott Bessent crow about how much money is flowing into the Treasury due to higher tariffs.<\/p>\n

Tariffs won\u2019t be the only drivers of inflation through this year, Orszag and Posen acknowledge. But the other drivers are also Trump policies. <\/p>\n

These include mass deportations of foreign-born workers. \u201cWhen deportation effects fully materialize,\u201d they write, \u201clabor shortages in migrant-dependent sectors will intensify, forcing wage increases that feed into services inflation \u2014 home health care costs are already rising at a 10 percent annual rate, near decade highs.\u201d <\/p>\n

Orszag and Posen also warn that the price shocks sustained by American consumers through 2025 and into this year could have lasting effects on consumer behavior, and therefore on the broader economy, even if statistics show inflation declining.<\/p>\n

\u201cLived experience with inflation has lasting effects on expectations,\u201d they observe. \u201cHouseholds remember salient price increases \u2014 eggs, meat, child care, home repairs \u2014 far more vividly than aggregate statistics. These memory effects persist for years or even generations.\u201d<\/p>\n

As Trump marks the first anniversary of his second term, the U.S. economy is showing its strain. As long as tariffs remain in Supreme Court limbo, there aren\u2019t any signals that things will get better.<\/p>\n","protected":false},"excerpt":{"rendered":"On Tuesday morning, all eyes on Wall Street seemed glued to the nearest screens in expectation that the…\n","protected":false},"author":2,"featured_media":143112,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[27],"tags":[71749,69922,11432,1750,71750,11253,384,71748,48,52,51,47,50,49,71751,3020,1929,22178,13967,1519,72],"class_list":["post-143111","post","type-post","status-publish","format-standard","has-post-thumbnail","category-los-angeles","tag-adam-posen","tag-american-consumer","tag-americans","tag-cost","tag-exporter","tag-good","tag-inflation","tag-kiel-institute","tag-la","tag-la-headlines","tag-la-news","tag-los-angeles","tag-los-angeles-headlines","tag-los-angeles-news","tag-orszag","tag-president-trump","tag-price","tag-researcher","tag-tariff","tag-trump","tag-year"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts\/143111","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/comments?post=143111"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts\/143111\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/media\/143112"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/media?parent=143111"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/categories?post=143111"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/tags?post=143111"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}