The authors ask “who bears the cost of these tariffs?” and use S&P Panijiva data from Jan 2024 to Nov 2025 for their 96% pass through rate to conclude tariffs function “as a consumption tax on Americans.” However, Panjiva is limited to FOIA requests for bill of lading data for 22 countries (Brazil, China, India, Mexico) and excludes major US trading partners, such as the EU, UK, and Canada[1].

The limitations of the data are highlighted by the authors’ somewhat bizarre claim that “a 10 percentage point increase in tariffs leads to only a 0.39% reduction in export prices.” Yet the luxury industry, a major component of European exporters, reduced prices in 35-40% of all products in 2025 and registered a drop in operating margins from 20% in 2023 to 15% in 2025[2]. European car manufacturers also had to adjust. Porsche reported a billion euro 3Q25 loss and a 99% drop in operating profit through 2025, leading to its removal from the DAX and the CEO’s ouster.[3]

The short answer to who pays: too early to tell. Many consumers balk at price increases and reduce consumption, while many foreign exporters seem to be waiting and seeing for the Supreme Court to rule against the administration’s IEEPA claims or the midterm elections before deciding permanent price changes. But exporters are experienced navigators of multiple tariff layers, both internal and external. Many economists have noted the “value-added tax (VAT) system, a tax on final consumption, which the US administration views as similar to a tariff.”[4]

[1] https://www.spglobal.com/market-intelligence/en/solutions/pr... [2] https://www.ft.com/content/9553baf3-7cfc-40c2-b6bd-1871844af... [3] https://observer.com/2025/10/porsche-profit-drop-luxury-econ... [4] https://think.ing.com/downloads/pdf/article/reciprocal-tarif...

I would argue tariffs are inherently easier to deal with than NTBs. I will never understand the absolute hate that is leveled at countries that use tariffs vs. the very noisy, tariff-hating countries that use NTBs.

EU is, obviously, one of the worst offenders here. Tariffs are a great evil...there are still massive barriers to trade within the EU. Let me repeat: WITHIN the EU, a bloc of countries that share a supra-national political system. Like Wymoing putting up a barrier to trade with Iowa (which, btw, do exist in the US too...but are significantly lower than in the EU where there isn't harmonization in even basic products like financial services due to the problems with competition in so many European countries).

The discussions on trade are insane.

Agreed. Never understood all NTB and tariff distinctions, except one suspects the pajandrums in Brussels and Geneva didn't quite believe companies could compete on price or product, and therefore needed a way to keep quotas and subsidies.

I'm not alone in this confusion. During oral argument, several Supreme Court justices asked repeatedly about the distinctions between quotas, tariffs, revenue-raising taxes, non-revenue taxes, etc. in IEEPA's statutory language and precedents like FEA v. Algonquin SNG, Inc., 426 U.S. 548 (1976).

Great points. This paper is a static, partial-equilibrium analysis that knows the price of everything and the value of nothing, which I suspect the NYT will happily run as gospel.

The most glaring, disqualifying omission is the disregard for FX adjustments. We have not seen the CNY/USD crash yet , but that is because of MASSIVE currency intervention from China to the tune of $200B+ per month: https://x.com/Brad_Setser/status/2012021712012145030

The other wonky thing is they call $200 billion in tariff revenue "a tax" and they also call it a "deadweight loss." Are the authors not the Keynesians I thought they were? At any rate, tariff revenue is not a new tax, but merely a shift in the tax base - since it is $200B that the government does not need to collect elsewhere.

Lastly the collapse of trade volumes from Brazil and India is not a bug it's a feature. Yes supply chains are sticky. The POINT of tariffs is to force supply chain decoupling and reshoring. To "unstuck" the supply chain. Does disruption come with temporary supply shocks? Of course.

The European export growth model is not working for Europe. They are not far behind the US in doing what we are attempting. Canada cozying up to China is not what they wanted for themselves, lol. Etc.

Static analysis in trade is very dangerous. I have never understood why these models are used. These had massive political consequence in the UK during Brexit, close to 100% of the predictions made by these models failed, and they were taken as truth (in the sense that: a prediction was made, and that was reported in the same way as an economic release). There was no real examination of why these known bad models were used.

Calling it a "deadweight loss" also doesn't seem justified by the evidence. It is extremely unclear whether there is a total economic loss because tariffs, if maintained, will have long-term economic consequences. You can point to countries where that went very badly (South American import substitution in the 50/60s, leading to economic free fall by the 80s) and ones where it went very well. It has always seemed quite unclear to me.

The stuff with Europe is also very odd because what do they think sanctions on Russia are? Not just a tariff, a blockade with no revenue raise. But the people who tell you that tariffs are a tax will tell you that sanctions have no issues.

I don't think that tariffs are good either btw. It just seems to a policy choice that is made in a context that can be either good or bad. Europe has massive barriers to trade internally (despite being in a political and economic union) that has been very expensive and harmful because it reduces competition/competitiveness. At least some of the protectionist measures of Trump and Biden are likely to work because the US is fundamentally quite competitive.

Can you name some of those peer reviewed publications say that tariffs wouldn't be paid by the consumer?

Below is the #1 paper, extraordinarily widely cited. They found that countries with significant market power systematically set higher tariffs on goods with inelastic supply, and in these cases the exporter lowers their price to absorb the tariff, improving the importer's terms of trade.

https://www.columbia.edu/~dew35/Papers/Optimal_Tariffs_Marke...

There was a paper, that i am not going to dig out, on the first set of China tariffs by Trump that found that exporters reduced margins. You don't have to look far, you just need to look a few years ago. For some reason, the claims made earlier last year were apocalyptic despite there being clear evidence from the very recent past that this wasn't the case (making money in equities last year was terribly easy).

Btw, you can find papers where tariffs are paid by consumer, where they aren't, where there is no effect. The thing that is being measured is completely different to the actual tariffs. The impact, like everything in economics, depends on the context in which the tool is used. That context is typically hard to model, so we end up with a lot of shitty papers claiming that it is about the tariff when it is about the context/implementation/etc.