It’s not a debate anymore: US companies and consumers are paying for US tariffs!
Recently, Piper Sandler shared an excellent piece of research that shed light on a key macro question: who is paying for US tariffs so far?
The US has been collecting tariffs at an increased pace over the last few weeks, with the annualized pace looking like $400bn+ in duties collected.
That’s a big number, which is helping to optically reduce deficits, but the real question is: who is paying for tariffs?
The simple equation to think about this problem is:
Tariffs = US import prices + US margins + US customer prices
- If import prices are falling, exporters are paying for tariffs.
- If US companies’ margins are falling, US companies are paying.
- If goods prices are increasing, US consumers are paying.
Piper Sandler found that so far:
1) Exporters are absorbing tariffs up to only 10-15%
2) Consumers are absorbing tariffs for 25-30%
3) US companies are bearing the brunt, with ~60% of tariff-led price increases being absorbed and hence hitting their margins
Who do you think will end up paying for tariffs when the dust settles?
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This article was originally published on The Macro Compass. Come join this vibrant community of macro investors, asset allocators and hedge funds – check out which subscription tier suits you the most using this link.