Short Time Horizon for Data Analysis: The study relies on data from January 2024 to November 2025, covering only about 7-8 months after the April 2025 tariff announcements. This captures primarily short-run effects, where pass-through to import prices is often high (near 100%), but longer-term adjustments could lead to greater absorption by foreign exporters. For instance, studies of the 2018-2019 trade war, such as Amiti, Redding, and Weinstein (NBER Working Paper 26610, 2019), found that initial pass-through was complete but declined over time in sectors like steel (falling to around 50% after a year). The Kiel analysis may overstate long-term incidence on U.S. buyers by not accounting for delayed responses like supply chain reorganization or price negotiations.
Incomplete Data Coverage: The dataset from Panjiva includes only ocean-freight shipments (over 25.6 million transactions valued at $4 trillion), excluding air and land imports. This omission could bias results, as air freight often involves higher-value goods with different pricing dynamics, and land imports (e.g., from Mexico or Canada) might respond differently to tariffs. Broader U.S. import data from sources like the Census Bureau show that ocean freight accounts for a significant but not comprehensive share of trade, potentially skewing estimates of overall pass-through.
Reliance on Unit Values as Price Proxies: Import prices are measured as unit values (value per kg), which can be confounded by changes in product quality, mix, or shipping costs rather than true price adjustments. The authors acknowledge this as a potential issue and use validations like Indian FOB export data, but critics of similar studies (e.g., in the 2018-2019 trade war analyses by the U.S. International Trade Commission) note that unit values often overestimate pass-through by not distinguishing between price changes and compositional shifts. This could inflate the estimated 96% pass-through rate.
Weak Statistical Significance in Key Estimates: The baseline regression coefficient (β = -0.039) indicating 96% pass-through is only statistically significant at the 10% level, which is below conventional thresholds (5% or 1%) in economic research. This suggests the result may not be robust to minor specification changes or data noise, raising questions about the reliability of the claim that exporters absorb less than 4% of the burden.
Aggregation Masks Heterogeneity: The study reports an aggregate pass-through estimate but does not break it down sufficiently by product, country, or sector. Research on prior tariffs (e.g., Fajgelbaum et al., NBER Working Paper 25638, 2019) shows significant variation: undifferentiated goods like commodities may see more exporter absorption, while differentiated consumer goods exhibit fuller pass-through. By pooling data, the analysis may overlook these differences, leading to overly generalized conclusions.
Focus on Border Prices Without Retail Pass-Through Analysis: The paper examines pass-through at the border (to importers) but extrapolates to consumers bearing "nearly all the cost" without direct evidence on retail prices. Studies like Cavallo et al. (NBER Working Paper 26396, 2019) and the Federal Reserve Bank of Boston (Working Paper 19-12, 2019) find that while border pass-through is near-complete, retail pass-through is partial (around 50-80%), with retailers absorbing some costs through reduced margins. This gap could mean the study overstates the ultimate burden on end consumers, ignoring supply chain buffers.
The general premise of tariffs is that a foreign product costs e.g. $100 whereas a domestic product costs $120. If you then put a 50% tariff on the foreign product, it would cost $150, and then people would prefer the domestic product and only be paying 20% instead of 50%. Moreover, they might prefer the domestic product in general (e.g. higher quality and/or patriotism) and only buy the foreign product if it's actually less expensive, and then the foreign manufacturer would have to lower their price from $100 to $70 so that the tariff only raises the price to $105 because any higher price than that and they lose the business.
The result, in theory, is that you would pay $5 more rather than $50 more. Meanwhile the government collected $35 in tariffs on the foreign product, $30 of which came from the manufacturer rather than you, and that allows the government to lower your other taxes by $35 at the same level of government spending and borrowing.
There are essentially two things required for this to work in your favor on net: 1) the tariffs cause the foreign manufacturer to lower their pre-tariff prices at all, and 2) the government uses the tariff revenue instead of some other taxes they would have collected directly or indirectly from you, so that your net tax burden stays the same. It can also be some mix of these, e.g. the foreign manufacturer lowers their price by $10, you pay $15 in tariffs and get a $10 reduction in other taxes, and then you're ahead by $5.
Ironically, the primary way domestic taxpayers end up paying more is if the tariffs succeed in causing people to buy domestic products, because then there is no tariff revenue on the domestic products and people pay the higher price for the domestic products without a reduction in other taxes.
There's a third requirement which you've glossed over somewhat: a domestic manufacturer of that product needs to exist. For many of the products which are currently the subject of US tariffs, domestic manufacturing is nonexistent, or is itself impacted by tariffs on imported materials.
There is hardly anything that is made domestically in the US. So the premise falls apart almost immediately. This premise works great for India where domestic production exceeds exports by massive margins and the economy depends mostly on domestic economy. It does not work for US where there is hardly any domestic production and is totally import driven economy.
The US has the second largest manufacturing base in the world after China. It's larger than India and is even slightly larger than the EU. It used to be the largest. Moreover, if the premise is that you're trying to bring back manufacturing capacity, it doesn't matter if something is currently made in the US, what matters is what it would cost if it was, because a tariff in excess of the difference would then make that cost effective.
Obviously in the latter case you would then have to wait until that manufacturing capacity comes back online, but "customers switch to a domestic product" isn't the only thing that can cause foreign manufacturers to have to lower prices. They could also switch to substitute products or reduce consumption and then foreign manufacturers would still have to lower prices to limit the extent to which that happens.
> The US has the second largest manufacturing base in the world after China. It's larger than India and is even slightly larger than the EU.
Of only end products. The "largest manufacturing base" is misleading when majority of inputs for your finished goods are dependent on imports.
> it doesn't matter if something is currently made in the US
It definitely does matter. The right way to have gone about this was to first build the manufacturing capacity in US before imposition of tariffs. It was done in the reverse, which led to US revealing its hand too early, allowing for rest of the World to re-calibrate and start the process of de-dollarization.
> foreign manufacturers to have to lower prices. They could also switch to substitute products or reduce consumption and then foreign manufacturers would still have to lower prices to limit the extent to which that happens.
It won't happen. There is no reason for exporters to lower prices when tariffs only set a new normal. Once the prices have gone up and consumer spending has stabilized around those jacked up prices, that will set the benchmark. Just study history. No product has been devalued due to any contingent circumstances unless the product itself becomes obsolete. Here you are not talking about novel products being developed and manufactured that will obsolete something popular. You are talking about bringing back manufacturing of nuts, bolts etc. Things that are critical and have an already established price in the market that will only go up higher in price once manufacturing moves to US eventually. Rest of the World will adjust to the new higher price.
China has a third of global manufacturing capacity (and have to run flat out to avoid deflation due to domestic consumption that will never grow to meet domestic production capacity). Only the unsophisticated could believe the US is going to increase domestic manufacturing capacity at the levels needed to make domestic sourcing superior in some manner. That’s why these tariffs are not grounded in reality.
In three years at the most, these tariffs are done. Cheaper to eat the premium in the short term versus suboptimally invest capital in long duration investments (ie local factories and equipment to fill them). Manufacturing jobs continue to decline, as they have since the election.
While in the abstract and academic sense this is true, in practice there are two big problems that make it an utter non-starter*:
1) Due to the absolutely massive supply chains that have been built up in East Asia (not just China, but many other countries around there), and lack of same in the US, even for products where it's physically possible to produce it all domestically, from the raw materials on up, it would take decades of sustained investment without return before actual consumer products could be made on anything other than a one-off basis. Any step that can't be done in-country gets the tariffs slapped on again. And there are a fair number of raw materials we just don't have, at least not in the kinds of amounts that, um, the entire rest of the world does, that are required for mass production.
2) Trump isn't applying tariffs in a strategic manner to get domestic manufacturing to come back. He's applying tariffs as his personal punishment stick, and to all appearances that's the best he's actually capable of doing with them. In order for any of what I described in #1 to happen, ever, the tariffs need to be applied consistently, predictably, and for a long time.
Trump doesn't want to do any of that. He's just found a magic stick that makes people kowtow to him, and he's going to use it however he pleases.
* Not that I think you're unaware of these, based on your post; to a large extent I'm just expanding upon your second paragraph here.
> it would take decades of sustained investment without return before actual consumer products could be made on anything other than a one-off basis.
That's true of some products, not all of them, or even a majority. And even for those products, well, if it's going to take a long time then we better get started.
> And there are a fair number of raw materials we just don't have
This is again not the common case, and even then it's not necessarily the wrong solution. For example, China currently dominates the production of rare earths and the US doesn't have sufficient reserves, but Australia does, so higher tariffs on China than Australia create an incentive to move mining operations to Australia which breaks China's lock, and creates the incentive to invest in rare earth processing in the US, since then you're only paying the (lower) tariff on the (lower-priced) raw materials rather than the (higher-priced) refined product.
> Trump isn't applying tariffs in a strategic manner to get domestic manufacturing to come back.
This is more of a Trump problem than a tariff problem. If you do something wrongly enough it obviously doesn't work as well as it otherwise might.
> China currently dominates the production of rare earths and the US doesn't have sufficient reserves, but Australia does, so higher tariffs on China than Australia create an incentive to move mining operations to Australia which breaks China's lock
There are "sufficient reserves" (known rare earths in the ground) across the globe and the US absolutely has large reserves.
> to move mining operations to Australia which breaks China's lock
There are already mining operations in Australia delivering raw concentrates in bulk to China. Again, not a shortage of mining operations or a shortage of reserves in the ground.
It's the concentrate processing that China invested time and capital in decades past - every other country about the globe (save for Malaysia, to their regret) figured they'd leave the acres of acid ponds and low level radioactive waste to the Chinese.
Now the US wants Australia to take that on, and that's a deal with the devil for Oz while the current POTUS cannot be trusted to hold up any deal.
I think we all understand how tariffs are intended to work. The problem is that we also know from experience that this is not how they work in practice, and historically are associated with negative economic outcomes overall. The findings described in the article appear consistent with past negative experience.
One correction regarding the tax impact: since tariffs are a flat tax and not progressive, to the extent that they displace progressive income tax, the net tax burden on the average taxpayer would increase, not remain the same.
"The general premise of tariffs is that a foreign product costs e.g. $100 whereas a domestic product costs $120."
The analysis following seems to think that the tariff is placed upon the retail price of the goods as opposed to the production cost, which excludes marketing, final transportation, storage, r&d, domestic staff costs, profit, etc.
A more important aspect not mentioned is getting rid of the de minimis exemption that allowed people to ship stuff tariffs-- free into the US as long as they declared the value less than $750.
Based on my (limited) understanding of RTRI, they have very specific items they fund and pretty low overall impact to the trade balance ($1M per org and $1B over 3 years program total across all industries). From [1]:
----------
Productivity improvement:
- investing in digitization, automation, or technology to enhance business productivity and competitiveness
- reshoring production, research & development (R&D) operations, recruiting highly qualified personnel (HQP) and expertise
Market expansion and diversification:
- developing and diversifying markets to help businesses find new customers
- business support, market development and diversification, and guidance services (e.g., advice for businesses from a sectoral expert organization)
Strengthening supply chains and trade resilience:
- optimizing supply chain logistics and ensuring compliance with standards to gain market access and/or enhance sales
- strengthening domestic supply chains and facilitating internal trade to increase the resilience of businesses and reliability of domestic markets
----------
This $1B program — even if it all went straight to subsidizing tariffs on Canadian imports — would be a pretty small rounding error out of the total $200B raised through tariffs from the article.
If anything, RTRI funds are largely about efficiency and pivoting to new markets. While there may be some outcomes that result in producers being able to lower their export costs, they're not "paying for" US tariffs.
As for tariffs, SmarterEveryDay has proven that we need them with his smart grill scrubber that got destroyed by cheap Chinese copycats the moment it became popular.
I'm working on a smart air quality monitor, I don't want competition with the Chinese either.
It doesn't need to be tech. From the Guidelines section of HN:
On-Topic: Anything that good hackers would find interesting. That includes more than hacking and startups. If you had to reduce it to a sentence, the answer might be: anything that gratifies one's intellectual curiosity.
Off-Topic: Most stories about politics, or crime, or sports, or celebrities, unless they're evidence of some interesting new phenomenon. Videos of pratfalls or disasters, or cute animal pictures. If they'd cover it on TV news, it's probably off-topic.
You really don't need ANY study to know the obvious thing that tariffs are taxes on imports. It is being paid by Americans from DAY 1. The only difference being American Companies were taking the brunt of it all and it is now obvious that they cannot keep swallowing it and will eventually pass it on to the American consumers.
It is crazy that so many in US STILL think tariffs are being paid for by exporting countries.
US is sabotaging itself and pushing in the same "New World Order" that the right-wing conspiracy nuts kept warning about but ironically have been instrumental in accelerating it themselves anyways.
Or maybe that was the design all along. To not go out in a whimper but with a big bang.
If I were the Democrats, I would do nothing and just let the US admin destroy whatever little credibility it has left on the World stage... thereby securing mid-terms and the next Presidential elections.
> If I were the Democrats, I would do nothing and just let the US admin destroy whatever little credibility it has left on the World stage... thereby securing mid-terms and the next Presidential elections.
Not a great idea. The US will have lost a lot of political goodwill by then. And given up a lot of geopolitical status and influence. The devices will be back in the saddle but have to resort to really unpopular measures to clean up the mess, basically guaranteeing a republican win afterwards.
And some credibility and influence will never recover. The rest of the world will remember there can always be another trump. And they will have switched to (and restarted) local industries. Once those are running there's no incentive to look at US ones again. And any geopolitical influence that was lost will already have been filled by other players who will entrench themselves.
> The US will have lost a lot of political goodwill by then
Not really. All Governments across the World have undergone similar crisis in their own Countries, in different points in time in their own history, and know well to differentiate an erratic Government from its populace. I bet no one has ill-will towards Americans (unless you are into terrorism) and so will obviously want to mend ways once a better admin is elected and put in place.
The issue really though is not about political goodwill. It is about business that gets moved elsewhere. Once moved, it is really hard to bring it back. So US will then have to make a lot of concessions when it comes to that. The reason rest of the World is upset with the new tariff regime is not because they are being affected by it monetarily (which they actually are not), but because they do not want to sever a well established system and go looking for new buyers/sellers. For example, China decided to stop buying soybeans from US (after Trump threatened tariffs) and switched to buying from Argentina. Now once a new US admin is in place, it will have to give a better deal for China to switch its already established supply chain with Argentina to US again. Inertia is a good thing in trade. Infact, I feel it is even more important than building a moat. People are willing to continue paying higher price (even if something cheap is available elsewhere) because they do not want to go through the hassle of moving away from already established supply-chains and renegotiate new deals.
> really unpopular measures to clean up the mess
Agreed.
> Once those are running there's no incentive to look at US ones again
They will if US comes with better deals. This is the "unpopular measures to clean up the mess" you were pointing to earlier. Right now there is a mismatch between what US is actually worth and what it is projecting. I am not saying it is not a superpower anymore. It still very much is. But it is failing to recognize the rise of great powers in the rest of the World. And is unable to reconcile with multi-polarity that has already arrived and exists. As long as US is in denial of this reality, it will continue to make mistakes.
> And any geopolitical influence that was lost will already have been filled by other players who will entrench themselves
I agree but I'll go further and argue that the Trump admin is behaving erratically because it has realized it has lost geopolitical influence and that other players have already entrenched themselves. Trump has diagnozed the problem correctly (that US has lost its hegemony in many areas) but has no expertise (or even experts around him) to advice him on the right course of action.
> It is crazy that so many in US STILL think tariffs are being paid for by exporting countries.
They knew it was a lie then, and they know it's one now. A plurality of voters want what's happening currently, they're not crazy, it's just a mix of xenophobia, isolationism, and inbreeding.
The problem with that last is that if the Democrats do nothing, there's a very real chance that Trump deploys the military to either prevent the midterms from happening, or to force their outcome to be what he wants.
(Of course, if they do something there's still a chance he does that—they have to do the right thing and they have to do it well to reduce the chances by much!)
There's also that pesky matter of, y'know, their constituents. Who are getting bled dry by the stagflation that's happening.
It's like punching yourself in the face and then taking Tylenol for the pain until your friends do what you want. It's psychotic, doesn't work, and they're probably not going to want to hang out until you get some help.
Far from getting a break, you guys are paying tax on tax. You indirectly pay for import taxes every time your companies import raw materials needed to finish their goods (added value) and then that final value (cost of import + added value) has its own sales tax. AFAIK there are no input credits for US sales tax. Then you also have VAT but at least VAT is only on the added value.
Income tax is way better as you can reduce the tax burden by including expenses/deductions. You cannot do the same for tariffs, sales tax and VAT as an end consumer. VAT is only beneficial to businesses as they can subtract inputs from outputs.
> You indirectly pay for import taxes every time your companies import raw materials needed to finish their goods (added value) and then that final value (cost of import + added value) has its own sales tax.
This isn't really any different than any other kind of taxes. You pay income tax and then pay sales tax using the money that was already taxed as income. The construction company pays sales tax when it buys a backhoe, which increases construction costs and therefore real estate prices, and then you pay property tax on the higher real estate prices, and make the bigger mortgage payment with money that was already taxed as income.
The only way you'd really get something different with tariffs is if the supply chain for some product passes through the local country multiple times, i.e. it gets imported, exported and then imported again. Which probably happens occasionally but isn't the common case.
Meanwhile how many times something is taxed isn't really the relevant thing. It's, how much in total are you paying in taxes? If you pay ~10% three times, that's not really any worse than paying ~33% once. It is, of course, worse than paying 10% once.
> This isn't really any different than any other kind of taxes. You pay income tax and then pay sales tax using the money that was already taxed as income
It definitely does make a huge difference. From sibling comment I got to know US does not even have VAT. It only makes the situation worse as the businesses operating in US cannot offset input credits against their output liability as Sales Tax has no such concept. So you are paying tax-on-tax-on-tax all the way to your raw materials that have been imported APART from paying tariffs. No wonder prices are so jacked up in US and to compensate that, you all have inflated salaries. The US Government is fleecing its citizens dry. Please study how VAT/GST works in EU/India/Australia and compare it with Sales Tax regime in US and you will know why Sales Tax is so bad.
> Meanwhile how many times something is taxed isn't really the relevant thing. It's, how much in total are you paying in taxes? If you pay ~10% three times, that's not really any worse than paying ~33% once. It is, of course, worse than paying 10% once.
You are not paying 10% three times. Assuming raw material was imported at $X + %10 of $X (tariff is 10%), value add was say $10, then the IRS is collecting say sales tax of 10% of the total value: 10 % of (($X + %10 of $X) + $10). Now this is just the simplest chain where raw material -> imported by manufacturer -> sold directly to consumer. But that is not how it is done. You typically buy from a retailer who buys from a dealer who buys from a wholesaler/manufacturer. So that would be 10% every time ON THE FULL VALUE (not just on value added).
To demonstrate a simple raw material -> imported by manufacturer with value added -> sold to dealer/distributor -> sold to retailer -> sold to customer, this is what it would look like:
1. Imported by manufacturer:
$X + %10 of $X
2. Value added ($10) and sold to dealer/distributor:
10 % of (($X + %10 of $X) + $10)
3. Dealer stocking/shipping charges added (say $10 again) and sold to retailer:
10% of (10 % of (($X + %10 of $X) + $10) + $10).
4. Retailer stocking/service charges added (say $10 again) and sold to consumer:
10% of (10% of (10 % of (($X + %10 of $X) + $10) + $10) + $10).
The longer the chain, the more tax-on-tax you are paying (in some cases the total final tax can even go above the actual cost of making the product). This nonsense is solved by VAT/GST where the tax you pay for acquiring raw material or processed inputs comes back to you as input credits, which you can use to offset your output tax liability. There is no compounding of tax in VAT/GST.
Even with 90B in tariffs collected this fiscal year (since October) the government still spent 600B more than they collected.[1][2] Tax cuts would be great, but if you cut taxes without cutting spending you're just borrowing that tax cut from future generations. (270B of that 600B hole is interest payments on debt incurred by previous generations doing exactly that to us.)
Oh no no, we still have tax cuts for the wealthy, $800B in debt servicing, and $1T/year in military spending to pay for. The tariffs were a regressive tax to compensate for the tax cuts for the wealthy.
The only threat that works against Trump doing destructive things is to say to build a slightly bigger white house for Biden to feature him in a reality show and put him on the front page on a full page and Trump on a the second page at a half page.
I am checking conservative echo chambers from time to time and find it ridiculous that they always find a positive spin on all the obvious grifting and destruction that is happening around them. we are witnessing the downfall of an empire with our own eyes and can do absolutely NOTHING
I build homes and so am adjacent to many blue collar Trump fanatics, here's the thing I constantly hear;
> My tool for X used to cost $500 or $2000. The $500 was imported and good enough for me. I could never justify spending $2000 on the Made in USA version although it was very well built and I wanted it. Now, with tariffs, the import costs $1800, so it's easy for me to justify spending $2000 on the Made in USA option. Trump got me to buy American and support American manufacturing. Go MAGA!
It's strange how if the same economic condition existed due to a Biden (or any liberal presidents term) they surely would have been villainized for eliminating ANY lower cost option, increasing the cost of business (when tools cost more, everything they create costs more), and simply stealing food from people's families (as the $1500 extra he spent would have presumably remained in this contractor's profits in the pre-tariff reality not to long ago). It takes massive mental gymnastics to view this as beneficial and anything other than a direct tax on American consumers. The brain washing rhetoric of conservative media is an extremely powerful weapon.
So when are they coming out with a study on how to regain the lost industrial and technological base, so as not to become totally dependent on a hostile competitor?
There's a guaranteed fix, but no one is going to advocate for it: replace the dollar as the global reserve currency.
The replacement of the Bretton Woods system in the 1970s with the petrodollar, transformed the US from a creditor nation to a debtor nation, and shifted economic and financial incentives in ways that resulted in deindustrialization followed by trade imbalance.
If we want to reindustrialize, it's simple: de-dollarize the global reserve. The downside is that it affects the finance bros and the US's ability to apply economic pressure to achieve political outcomes on the world stage. If you think the benefits afforded in international politics outweighs deindustrialization, thats fine, but you can't have both.
My boneheaded proposal is the opposite of Trump's approach: give the rest of the world coupons to buy made-in-USA products and machinery at a steep discount. Ship stuff to the rest of the world and ask nothing in return. Get the orders rolling in from around the world, pushing up economies of scale.
Of course, this will make American consumers much poorer on average, but boost production capacity. Sort of what China does.
Not to mention, as has been said many times before, there isn't much incentive to build out manufacturing in the US when its trade policy is constantly shifting at the whims of one person. Businesses need stability, and this President delivers the opposite.
Any such plan requires evicting the fascist grifters first, and rejecting these fake calls of "fiscal responsibility" that have been running interference for the past several decades. Then, proceeds from having the world reserve currency could be spent deliberately (re)building our industry rather than just being dumped into handouts for the rich.
But in a way the reelection of the New York conman was the final nail in the coffin assuring that this will never happen. The red tribe found it more appealing to turn their frustration inwards and attack our country rather than working with the blue tribe to constructively address these types of problems. And with the subsequent destruction of most everything that had made us a world leader, it's questionable whether we will even have the world reserve currency for much longer.
Problems with this study...
Short Time Horizon for Data Analysis: The study relies on data from January 2024 to November 2025, covering only about 7-8 months after the April 2025 tariff announcements. This captures primarily short-run effects, where pass-through to import prices is often high (near 100%), but longer-term adjustments could lead to greater absorption by foreign exporters. For instance, studies of the 2018-2019 trade war, such as Amiti, Redding, and Weinstein (NBER Working Paper 26610, 2019), found that initial pass-through was complete but declined over time in sectors like steel (falling to around 50% after a year). The Kiel analysis may overstate long-term incidence on U.S. buyers by not accounting for delayed responses like supply chain reorganization or price negotiations.
Incomplete Data Coverage: The dataset from Panjiva includes only ocean-freight shipments (over 25.6 million transactions valued at $4 trillion), excluding air and land imports. This omission could bias results, as air freight often involves higher-value goods with different pricing dynamics, and land imports (e.g., from Mexico or Canada) might respond differently to tariffs. Broader U.S. import data from sources like the Census Bureau show that ocean freight accounts for a significant but not comprehensive share of trade, potentially skewing estimates of overall pass-through.
Reliance on Unit Values as Price Proxies: Import prices are measured as unit values (value per kg), which can be confounded by changes in product quality, mix, or shipping costs rather than true price adjustments. The authors acknowledge this as a potential issue and use validations like Indian FOB export data, but critics of similar studies (e.g., in the 2018-2019 trade war analyses by the U.S. International Trade Commission) note that unit values often overestimate pass-through by not distinguishing between price changes and compositional shifts. This could inflate the estimated 96% pass-through rate.
Weak Statistical Significance in Key Estimates: The baseline regression coefficient (β = -0.039) indicating 96% pass-through is only statistically significant at the 10% level, which is below conventional thresholds (5% or 1%) in economic research. This suggests the result may not be robust to minor specification changes or data noise, raising questions about the reliability of the claim that exporters absorb less than 4% of the burden.
Aggregation Masks Heterogeneity: The study reports an aggregate pass-through estimate but does not break it down sufficiently by product, country, or sector. Research on prior tariffs (e.g., Fajgelbaum et al., NBER Working Paper 25638, 2019) shows significant variation: undifferentiated goods like commodities may see more exporter absorption, while differentiated consumer goods exhibit fuller pass-through. By pooling data, the analysis may overlook these differences, leading to overly generalized conclusions.
Focus on Border Prices Without Retail Pass-Through Analysis: The paper examines pass-through at the border (to importers) but extrapolates to consumers bearing "nearly all the cost" without direct evidence on retail prices. Studies like Cavallo et al. (NBER Working Paper 26396, 2019) and the Federal Reserve Bank of Boston (Working Paper 19-12, 2019) find that while border pass-through is near-complete, retail pass-through is partial (around 50-80%), with retailers absorbing some costs through reduced margins. This gap could mean the study overstates the ultimate burden on end consumers, ignoring supply chain buffers.
Of course... who did you think would pay?
> who did you think would pay?
The general premise of tariffs is that a foreign product costs e.g. $100 whereas a domestic product costs $120. If you then put a 50% tariff on the foreign product, it would cost $150, and then people would prefer the domestic product and only be paying 20% instead of 50%. Moreover, they might prefer the domestic product in general (e.g. higher quality and/or patriotism) and only buy the foreign product if it's actually less expensive, and then the foreign manufacturer would have to lower their price from $100 to $70 so that the tariff only raises the price to $105 because any higher price than that and they lose the business.
The result, in theory, is that you would pay $5 more rather than $50 more. Meanwhile the government collected $35 in tariffs on the foreign product, $30 of which came from the manufacturer rather than you, and that allows the government to lower your other taxes by $35 at the same level of government spending and borrowing.
There are essentially two things required for this to work in your favor on net: 1) the tariffs cause the foreign manufacturer to lower their pre-tariff prices at all, and 2) the government uses the tariff revenue instead of some other taxes they would have collected directly or indirectly from you, so that your net tax burden stays the same. It can also be some mix of these, e.g. the foreign manufacturer lowers their price by $10, you pay $15 in tariffs and get a $10 reduction in other taxes, and then you're ahead by $5.
Ironically, the primary way domestic taxpayers end up paying more is if the tariffs succeed in causing people to buy domestic products, because then there is no tariff revenue on the domestic products and people pay the higher price for the domestic products without a reduction in other taxes.
There's a third requirement which you've glossed over somewhat: a domestic manufacturer of that product needs to exist. For many of the products which are currently the subject of US tariffs, domestic manufacturing is nonexistent, or is itself impacted by tariffs on imported materials.
> whereas a domestic product costs
There is hardly anything that is made domestically in the US. So the premise falls apart almost immediately. This premise works great for India where domestic production exceeds exports by massive margins and the economy depends mostly on domestic economy. It does not work for US where there is hardly any domestic production and is totally import driven economy.
The US has the second largest manufacturing base in the world after China. It's larger than India and is even slightly larger than the EU. It used to be the largest. Moreover, if the premise is that you're trying to bring back manufacturing capacity, it doesn't matter if something is currently made in the US, what matters is what it would cost if it was, because a tariff in excess of the difference would then make that cost effective.
Obviously in the latter case you would then have to wait until that manufacturing capacity comes back online, but "customers switch to a domestic product" isn't the only thing that can cause foreign manufacturers to have to lower prices. They could also switch to substitute products or reduce consumption and then foreign manufacturers would still have to lower prices to limit the extent to which that happens.
> The US has the second largest manufacturing base in the world after China. It's larger than India and is even slightly larger than the EU.
Of only end products. The "largest manufacturing base" is misleading when majority of inputs for your finished goods are dependent on imports.
> it doesn't matter if something is currently made in the US
It definitely does matter. The right way to have gone about this was to first build the manufacturing capacity in US before imposition of tariffs. It was done in the reverse, which led to US revealing its hand too early, allowing for rest of the World to re-calibrate and start the process of de-dollarization.
> foreign manufacturers to have to lower prices. They could also switch to substitute products or reduce consumption and then foreign manufacturers would still have to lower prices to limit the extent to which that happens.
It won't happen. There is no reason for exporters to lower prices when tariffs only set a new normal. Once the prices have gone up and consumer spending has stabilized around those jacked up prices, that will set the benchmark. Just study history. No product has been devalued due to any contingent circumstances unless the product itself becomes obsolete. Here you are not talking about novel products being developed and manufactured that will obsolete something popular. You are talking about bringing back manufacturing of nuts, bolts etc. Things that are critical and have an already established price in the market that will only go up higher in price once manufacturing moves to US eventually. Rest of the World will adjust to the new higher price.
China has a third of global manufacturing capacity (and have to run flat out to avoid deflation due to domestic consumption that will never grow to meet domestic production capacity). Only the unsophisticated could believe the US is going to increase domestic manufacturing capacity at the levels needed to make domestic sourcing superior in some manner. That’s why these tariffs are not grounded in reality.
In three years at the most, these tariffs are done. Cheaper to eat the premium in the short term versus suboptimally invest capital in long duration investments (ie local factories and equipment to fill them). Manufacturing jobs continue to decline, as they have since the election.
US factory headcount falling despite Trump's promised manufacturing boom - https://news.ycombinator.com/item?id=46638269 - January 2026
U.S. Among Top 3 Markets Manufacturers Are Leaving - https://www.manufacturing.net/supply-chain/news/22950252/us-... - September 16th, 2025
https://fred.stlouisfed.org/series/TLMFGCONS
While in the abstract and academic sense this is true, in practice there are two big problems that make it an utter non-starter*:
1) Due to the absolutely massive supply chains that have been built up in East Asia (not just China, but many other countries around there), and lack of same in the US, even for products where it's physically possible to produce it all domestically, from the raw materials on up, it would take decades of sustained investment without return before actual consumer products could be made on anything other than a one-off basis. Any step that can't be done in-country gets the tariffs slapped on again. And there are a fair number of raw materials we just don't have, at least not in the kinds of amounts that, um, the entire rest of the world does, that are required for mass production.
2) Trump isn't applying tariffs in a strategic manner to get domestic manufacturing to come back. He's applying tariffs as his personal punishment stick, and to all appearances that's the best he's actually capable of doing with them. In order for any of what I described in #1 to happen, ever, the tariffs need to be applied consistently, predictably, and for a long time.
Trump doesn't want to do any of that. He's just found a magic stick that makes people kowtow to him, and he's going to use it however he pleases.
* Not that I think you're unaware of these, based on your post; to a large extent I'm just expanding upon your second paragraph here.
> it would take decades of sustained investment without return before actual consumer products could be made on anything other than a one-off basis.
That's true of some products, not all of them, or even a majority. And even for those products, well, if it's going to take a long time then we better get started.
> And there are a fair number of raw materials we just don't have
This is again not the common case, and even then it's not necessarily the wrong solution. For example, China currently dominates the production of rare earths and the US doesn't have sufficient reserves, but Australia does, so higher tariffs on China than Australia create an incentive to move mining operations to Australia which breaks China's lock, and creates the incentive to invest in rare earth processing in the US, since then you're only paying the (lower) tariff on the (lower-priced) raw materials rather than the (higher-priced) refined product.
> Trump isn't applying tariffs in a strategic manner to get domestic manufacturing to come back.
This is more of a Trump problem than a tariff problem. If you do something wrongly enough it obviously doesn't work as well as it otherwise might.
> China currently dominates the production of rare earths and the US doesn't have sufficient reserves, but Australia does, so higher tariffs on China than Australia create an incentive to move mining operations to Australia which breaks China's lock
There are "sufficient reserves" (known rare earths in the ground) across the globe and the US absolutely has large reserves.
> to move mining operations to Australia which breaks China's lock
There are already mining operations in Australia delivering raw concentrates in bulk to China. Again, not a shortage of mining operations or a shortage of reserves in the ground.
It's the concentrate processing that China invested time and capital in decades past - every other country about the globe (save for Malaysia, to their regret) figured they'd leave the acres of acid ponds and low level radioactive waste to the Chinese.
Now the US wants Australia to take that on, and that's a deal with the devil for Oz while the current POTUS cannot be trusted to hold up any deal.
I think we all understand how tariffs are intended to work. The problem is that we also know from experience that this is not how they work in practice, and historically are associated with negative economic outcomes overall. The findings described in the article appear consistent with past negative experience.
One correction regarding the tax impact: since tariffs are a flat tax and not progressive, to the extent that they displace progressive income tax, the net tax burden on the average taxpayer would increase, not remain the same.
"The general premise of tariffs is that a foreign product costs e.g. $100 whereas a domestic product costs $120."
The analysis following seems to think that the tariff is placed upon the retail price of the goods as opposed to the production cost, which excludes marketing, final transportation, storage, r&d, domestic staff costs, profit, etc.
A more important aspect not mentioned is getting rid of the de minimis exemption that allowed people to ship stuff tariffs-- free into the US as long as they declared the value less than $750.
Because Canadian government gives money to some industries to pay for tariffs. It's called Regional Tariff Response Initiative (RTRI).
Based on my (limited) understanding of RTRI, they have very specific items they fund and pretty low overall impact to the trade balance ($1M per org and $1B over 3 years program total across all industries). From [1]:
----------
Productivity improvement:
- investing in digitization, automation, or technology to enhance business productivity and competitiveness
- reshoring production, research & development (R&D) operations, recruiting highly qualified personnel (HQP) and expertise
Market expansion and diversification:
- developing and diversifying markets to help businesses find new customers
- business support, market development and diversification, and guidance services (e.g., advice for businesses from a sectoral expert organization)
Strengthening supply chains and trade resilience:
- optimizing supply chain logistics and ensuring compliance with standards to gain market access and/or enhance sales
- strengthening domestic supply chains and facilitating internal trade to increase the resilience of businesses and reliability of domestic markets
----------
This $1B program — even if it all went straight to subsidizing tariffs on Canadian imports — would be a pretty small rounding error out of the total $200B raised through tariffs from the article.
If anything, RTRI funds are largely about efficiency and pivoting to new markets. While there may be some outcomes that result in producers being able to lower their export costs, they're not "paying for" US tariffs.
Edit: formatting.
--
1: https://www.canada.ca/en/prairies-economic-development/servi...
But that still doesn't reduce the cost to US customers, it just means the Canadian businesses gets a subsidy to make up for reduced sales.
Mexico?
Exactly. This sounds more like an onion headline, lol
https://archive.is/https://www.wsj.com/economy/trade/america...
https://archive.is/lvQHh
Why is this flagged? Why are things critical of this administration usually flagged? Moderation on HN is a joke.
Is HN really a place to criticize administration?
As for tariffs, SmarterEveryDay has proven that we need them with his smart grill scrubber that got destroyed by cheap Chinese copycats the moment it became popular.
I'm working on a smart air quality monitor, I don't want competition with the Chinese either.
It’s not really anything to do with tech though, is it?
“This doesn’t belong here” is perfectly valid reaction to stuff covered on a million other sites.
It doesn't need to be tech. From the Guidelines section of HN:
On-Topic: Anything that good hackers would find interesting. That includes more than hacking and startups. If you had to reduce it to a sentence, the answer might be: anything that gratifies one's intellectual curiosity.
Off-Topic: Most stories about politics, or crime, or sports, or celebrities, unless they're evidence of some interesting new phenomenon. Videos of pratfalls or disasters, or cute animal pictures. If they'd cover it on TV news, it's probably off-topic.
You really don't need ANY study to know the obvious thing that tariffs are taxes on imports. It is being paid by Americans from DAY 1. The only difference being American Companies were taking the brunt of it all and it is now obvious that they cannot keep swallowing it and will eventually pass it on to the American consumers.
It is crazy that so many in US STILL think tariffs are being paid for by exporting countries.
US is sabotaging itself and pushing in the same "New World Order" that the right-wing conspiracy nuts kept warning about but ironically have been instrumental in accelerating it themselves anyways.
Or maybe that was the design all along. To not go out in a whimper but with a big bang.
If I were the Democrats, I would do nothing and just let the US admin destroy whatever little credibility it has left on the World stage... thereby securing mid-terms and the next Presidential elections.
> If I were the Democrats, I would do nothing and just let the US admin destroy whatever little credibility it has left on the World stage... thereby securing mid-terms and the next Presidential elections.
Not a great idea. The US will have lost a lot of political goodwill by then. And given up a lot of geopolitical status and influence. The devices will be back in the saddle but have to resort to really unpopular measures to clean up the mess, basically guaranteeing a republican win afterwards.
And some credibility and influence will never recover. The rest of the world will remember there can always be another trump. And they will have switched to (and restarted) local industries. Once those are running there's no incentive to look at US ones again. And any geopolitical influence that was lost will already have been filled by other players who will entrench themselves.
> The US will have lost a lot of political goodwill by then
Not really. All Governments across the World have undergone similar crisis in their own Countries, in different points in time in their own history, and know well to differentiate an erratic Government from its populace. I bet no one has ill-will towards Americans (unless you are into terrorism) and so will obviously want to mend ways once a better admin is elected and put in place.
The issue really though is not about political goodwill. It is about business that gets moved elsewhere. Once moved, it is really hard to bring it back. So US will then have to make a lot of concessions when it comes to that. The reason rest of the World is upset with the new tariff regime is not because they are being affected by it monetarily (which they actually are not), but because they do not want to sever a well established system and go looking for new buyers/sellers. For example, China decided to stop buying soybeans from US (after Trump threatened tariffs) and switched to buying from Argentina. Now once a new US admin is in place, it will have to give a better deal for China to switch its already established supply chain with Argentina to US again. Inertia is a good thing in trade. Infact, I feel it is even more important than building a moat. People are willing to continue paying higher price (even if something cheap is available elsewhere) because they do not want to go through the hassle of moving away from already established supply-chains and renegotiate new deals.
> really unpopular measures to clean up the mess
Agreed.
> Once those are running there's no incentive to look at US ones again
They will if US comes with better deals. This is the "unpopular measures to clean up the mess" you were pointing to earlier. Right now there is a mismatch between what US is actually worth and what it is projecting. I am not saying it is not a superpower anymore. It still very much is. But it is failing to recognize the rise of great powers in the rest of the World. And is unable to reconcile with multi-polarity that has already arrived and exists. As long as US is in denial of this reality, it will continue to make mistakes.
> And any geopolitical influence that was lost will already have been filled by other players who will entrench themselves
I agree but I'll go further and argue that the Trump admin is behaving erratically because it has realized it has lost geopolitical influence and that other players have already entrenched themselves. Trump has diagnozed the problem correctly (that US has lost its hegemony in many areas) but has no expertise (or even experts around him) to advice him on the right course of action.
> It is crazy that so many in US STILL think tariffs are being paid for by exporting countries.
They knew it was a lie then, and they know it's one now. A plurality of voters want what's happening currently, they're not crazy, it's just a mix of xenophobia, isolationism, and inbreeding.
The problem with that last is that if the Democrats do nothing, there's a very real chance that Trump deploys the military to either prevent the midterms from happening, or to force their outcome to be what he wants.
(Of course, if they do something there's still a chance he does that—they have to do the right thing and they have to do it well to reduce the chances by much!)
There's also that pesky matter of, y'know, their constituents. Who are getting bled dry by the stagflation that's happening.
Same with corporate taxes, its just targeted a different way.
Are we getting income tax breaks then?
No.
It's like punching yourself in the face and then taking Tylenol for the pain until your friends do what you want. It's psychotic, doesn't work, and they're probably not going to want to hang out until you get some help.
Far from getting a break, you guys are paying tax on tax. You indirectly pay for import taxes every time your companies import raw materials needed to finish their goods (added value) and then that final value (cost of import + added value) has its own sales tax. AFAIK there are no input credits for US sales tax. Then you also have VAT but at least VAT is only on the added value.
Income tax is way better as you can reduce the tax burden by including expenses/deductions. You cannot do the same for tariffs, sales tax and VAT as an end consumer. VAT is only beneficial to businesses as they can subtract inputs from outputs.
> You indirectly pay for import taxes every time your companies import raw materials needed to finish their goods (added value) and then that final value (cost of import + added value) has its own sales tax.
This isn't really any different than any other kind of taxes. You pay income tax and then pay sales tax using the money that was already taxed as income. The construction company pays sales tax when it buys a backhoe, which increases construction costs and therefore real estate prices, and then you pay property tax on the higher real estate prices, and make the bigger mortgage payment with money that was already taxed as income.
The only way you'd really get something different with tariffs is if the supply chain for some product passes through the local country multiple times, i.e. it gets imported, exported and then imported again. Which probably happens occasionally but isn't the common case.
Meanwhile how many times something is taxed isn't really the relevant thing. It's, how much in total are you paying in taxes? If you pay ~10% three times, that's not really any worse than paying ~33% once. It is, of course, worse than paying 10% once.
> This isn't really any different than any other kind of taxes. You pay income tax and then pay sales tax using the money that was already taxed as income
It definitely does make a huge difference. From sibling comment I got to know US does not even have VAT. It only makes the situation worse as the businesses operating in US cannot offset input credits against their output liability as Sales Tax has no such concept. So you are paying tax-on-tax-on-tax all the way to your raw materials that have been imported APART from paying tariffs. No wonder prices are so jacked up in US and to compensate that, you all have inflated salaries. The US Government is fleecing its citizens dry. Please study how VAT/GST works in EU/India/Australia and compare it with Sales Tax regime in US and you will know why Sales Tax is so bad.
> Meanwhile how many times something is taxed isn't really the relevant thing. It's, how much in total are you paying in taxes? If you pay ~10% three times, that's not really any worse than paying ~33% once. It is, of course, worse than paying 10% once.
You are not paying 10% three times. Assuming raw material was imported at $X + %10 of $X (tariff is 10%), value add was say $10, then the IRS is collecting say sales tax of 10% of the total value: 10 % of (($X + %10 of $X) + $10). Now this is just the simplest chain where raw material -> imported by manufacturer -> sold directly to consumer. But that is not how it is done. You typically buy from a retailer who buys from a dealer who buys from a wholesaler/manufacturer. So that would be 10% every time ON THE FULL VALUE (not just on value added).
To demonstrate a simple raw material -> imported by manufacturer with value added -> sold to dealer/distributor -> sold to retailer -> sold to customer, this is what it would look like:
1. Imported by manufacturer:
$X + %10 of $X
2. Value added ($10) and sold to dealer/distributor:
10 % of (($X + %10 of $X) + $10)
3. Dealer stocking/shipping charges added (say $10 again) and sold to retailer:
10% of (10 % of (($X + %10 of $X) + $10) + $10).
4. Retailer stocking/service charges added (say $10 again) and sold to consumer:
10% of (10% of (10 % of (($X + %10 of $X) + $10) + $10) + $10).
The longer the chain, the more tax-on-tax you are paying (in some cases the total final tax can even go above the actual cost of making the product). This nonsense is solved by VAT/GST where the tax you pay for acquiring raw material or processed inputs comes back to you as input credits, which you can use to offset your output tax liability. There is no compounding of tax in VAT/GST.
EDIT: added an example for more clarity
Wrong on so many accounts, including the IRS and where in the supply chain that sales tax is applied.
The US has no VAT.
So that makes it even worse then because Sales Tax has no input credits to offset against.
Republicans elected a president on the promise of introducing a new tax. Can't make this shit up.
Even with 90B in tariffs collected this fiscal year (since October) the government still spent 600B more than they collected.[1][2] Tax cuts would be great, but if you cut taxes without cutting spending you're just borrowing that tax cut from future generations. (270B of that 600B hole is interest payments on debt incurred by previous generations doing exactly that to us.)
[1] https://fiscaldata.treasury.gov/americas-finance-guide/gover...
[2] https://fiscaldata.treasury.gov/americas-finance-guide/feder...
In two weeks, just like the DOGE checks. Mark your calendar, two weeks.
> In two weeks, just like the DOGE checks. Mark your calendar, two weeks.
Is this before or after Infrastructure Week:
* https://politicaldictionary.com/words/infrastructure-week/
Oh no no, we still have tax cuts for the wealthy, $800B in debt servicing, and $1T/year in military spending to pay for. The tariffs were a regressive tax to compensate for the tax cuts for the wealthy.
Unflag this. Tariffs are a tech story.
Duh!
The only threat that works against Trump doing destructive things is to say to build a slightly bigger white house for Biden to feature him in a reality show and put him on the front page on a full page and Trump on a the second page at a half page.
duh
[dupe] Discussion: https://news.ycombinator.com/item?id=46680212
I am checking conservative echo chambers from time to time and find it ridiculous that they always find a positive spin on all the obvious grifting and destruction that is happening around them. we are witnessing the downfall of an empire with our own eyes and can do absolutely NOTHING
Best part is how "west" wants Russians public to revolt against tyranny while we boil like a frogs ... And do absolutely nothing.
I build homes and so am adjacent to many blue collar Trump fanatics, here's the thing I constantly hear;
> My tool for X used to cost $500 or $2000. The $500 was imported and good enough for me. I could never justify spending $2000 on the Made in USA version although it was very well built and I wanted it. Now, with tariffs, the import costs $1800, so it's easy for me to justify spending $2000 on the Made in USA option. Trump got me to buy American and support American manufacturing. Go MAGA!
It's strange how if the same economic condition existed due to a Biden (or any liberal presidents term) they surely would have been villainized for eliminating ANY lower cost option, increasing the cost of business (when tools cost more, everything they create costs more), and simply stealing food from people's families (as the $1500 extra he spent would have presumably remained in this contractor's profits in the pre-tariff reality not to long ago). It takes massive mental gymnastics to view this as beneficial and anything other than a direct tax on American consumers. The brain washing rhetoric of conservative media is an extremely powerful weapon.
is there really nothing to do?
"The Times 03/Jan/2009 Chancellor on brink of second bailout for banks."
So when are they coming out with a study on how to regain the lost industrial and technological base, so as not to become totally dependent on a hostile competitor?
I assume they're working on that, right?
Who’s the hostile competitor? Denmark? Germany?
Always the same trick - pretending not to understand.
Who is “they” in this question?
There's a guaranteed fix, but no one is going to advocate for it: replace the dollar as the global reserve currency.
The replacement of the Bretton Woods system in the 1970s with the petrodollar, transformed the US from a creditor nation to a debtor nation, and shifted economic and financial incentives in ways that resulted in deindustrialization followed by trade imbalance.
If we want to reindustrialize, it's simple: de-dollarize the global reserve. The downside is that it affects the finance bros and the US's ability to apply economic pressure to achieve political outcomes on the world stage. If you think the benefits afforded in international politics outweighs deindustrialization, thats fine, but you can't have both.
My boneheaded proposal is the opposite of Trump's approach: give the rest of the world coupons to buy made-in-USA products and machinery at a steep discount. Ship stuff to the rest of the world and ask nothing in return. Get the orders rolling in from around the world, pushing up economies of scale.
Of course, this will make American consumers much poorer on average, but boost production capacity. Sort of what China does.
This is a well known practice called dumping.
Expect other countries to retaliate.
So... A free trade deal.
They're tariffing manufacturing inputs. Almost everything we still make in America now costs us more to produce.
Don't anthropomorphize the misguided missiles in the Trump administration. There is no teleology behind the tariffs, only chaos and grift.
Not to mention, as has been said many times before, there isn't much incentive to build out manufacturing in the US when its trade policy is constantly shifting at the whims of one person. Businesses need stability, and this President delivers the opposite.
Any such plan requires evicting the fascist grifters first, and rejecting these fake calls of "fiscal responsibility" that have been running interference for the past several decades. Then, proceeds from having the world reserve currency could be spent deliberately (re)building our industry rather than just being dumped into handouts for the rich.
But in a way the reelection of the New York conman was the final nail in the coffin assuring that this will never happen. The red tribe found it more appealing to turn their frustration inwards and attack our country rather than working with the blue tribe to constructively address these types of problems. And with the subsequent destruction of most everything that had made us a world leader, it's questionable whether we will even have the world reserve currency for much longer.