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Study: US Businesses and Consumers Paid for China Tariffs

  //business-finance.news-articles.net/content/202 .. nesses-and-consumers-paid-for-china-tariffs.html
  Published in Business and Finance on Saturday, January 31st 2026 at 18:34 GMT by Investopedia
      Locales: UNITED STATES, CHINA

Washington D.C. - January 31st, 2026 - A recently released comprehensive study from the Peterson Institute for International Economics (PIIE) confirms what many economists suspected during the Trump administration: the vast majority of tariffs imposed on Chinese goods were ultimately paid for by American businesses and consumers, not China. The study, analyzing trade data from 2018 through 2020, reveals that a staggering 96% of the $360 billion in tariffs levied on imports from China fell squarely on U.S. shoulders.

This finding throws into sharp relief the original justification for the tariffs - to pressure China into changing its trade practices and to force them to absorb the cost. Instead, the evidence demonstrates a clear case of import costs being passed down the supply chain, impacting everything from manufacturing to retail and ultimately, the wallets of everyday Americans.

Michael Peterson, president and CEO of the Peterson Foundation, succinctly stated, "Most of the tariffs paid have been paid by U.S. businesses and consumers. It's not the Chinese who are paying these tariffs."

The PIIE study employed a sophisticated methodology, combining detailed trade data with analysis of price markups. Researchers meticulously tracked how prices changed on imported goods, comparing those markups against the corresponding tariff rates. This allowed them to determine the extent to which importers passed on the tariff costs to consumers. The results clearly indicated that importers did not absorb the tariffs themselves, but rather built them into the price of the goods they sold.

Beyond the Numbers: The Wider Economic Impact

The implications of this study extend far beyond simple accounting. The tariffs, while ostensibly designed to protect American industries, arguably inflicted significant damage on sectors reliant on imported components and materials. Manufacturers, unable to absorb the increased costs, were forced to raise prices on finished goods, reducing competitiveness both domestically and internationally. This created a ripple effect, impacting employment in some sectors and stifling overall economic growth.

Furthermore, the tariffs contributed to inflationary pressures, exacerbating existing economic challenges. While inflation has become a complex issue in recent years, driven by factors such as supply chain disruptions and increased demand following the pandemic, the Trump-era tariffs undeniably added fuel to the fire. Analysis from several sources, including the Tax Foundation [ https://www.taxfoundation.org/ ] supports this, showing how the tariffs acted as a regressive tax, disproportionately impacting low- and middle-income households who spend a larger percentage of their income on consumer goods.

The Illusion of Trade Wars

The study underscores the inherent difficulties in winning trade wars. The assumption that one nation can unilaterally impose tariffs without bearing significant economic consequences is demonstrably false. China, while experiencing some disruption in its exports, proved remarkably resilient, finding alternative markets and diversifying its trade relationships. The U.S., however, bore the brunt of the economic fallout.

Experts now suggest that the tariffs, rather than altering China's long-term economic behavior, primarily served to distort global trade flows and create uncertainty for businesses. The U.S. Chamber of Commerce has been vocal in its criticism of the tariff policy, arguing that it hampered economic growth and failed to achieve its stated objectives. [ https://www.uschamber.com/ ]

Looking Ahead: Policy Implications for 2026 The current administration has begun to unwind some of the Trump-era tariffs, but the debate over their efficacy and impact continues. The PIIE study provides compelling evidence that a more nuanced approach to trade policy is needed - one that prioritizes collaboration, negotiation, and a realistic assessment of the costs and benefits of protectionist measures.

The study's findings are particularly relevant as the U.S. considers its future trade strategy in a rapidly changing global landscape. With new trade agreements being negotiated and geopolitical tensions rising, policymakers must learn from the mistakes of the past and avoid repeating policies that ultimately harm American consumers and businesses. The financial burden of the tariffs has now been definitively proven, and a serious discussion about future trade strategies is crucial to ensure a stable and prosperous economic future for the United States.