So far, the costs of tariffs have mainly been absorbed by foreign suppliers, but increasingly they will fall on American consumers. Importantly, this has not translated into higher domestic production. While U.S. imports from China have fallen by 19% since the beginning of the year, imports from Vietnam, India, and Thailand have increased by 20% or more. Tariffs do not necessarily reduce dependence on foreign sources; rather, they reallocate supply and increase costs. Interestingly, price analysis shows that in most cases domestic product prices rose more sharply than imported goods. Thus, the conclusion seems clear: higher tariff revenues function as a hidden tax in the current trade system.
The trade war has negatively affected fewer than 25% of American products on the domestic market, mainly in the agri-food sector. In those cases, prices did not rise as much as expected, partly due to strong domestic competition and consumer price sensitivity. Retailers and wholesalers maintained sales and margins at reasonable levels, meaning they did not exploit tariffs for higher profits (for example, by stockpiling goods in advance to sell later at higher prices). Foreign suppliers, however, reduced their margins somewhat. While the overall U.S. import price index in August 2025 was unchanged year-on-year, prices fell for about one-third of products, including computers and electronics. This suggests only a moderate price increase for other goods, particularly consumer goods mainly from Asia.
Indirectly, American consumers are also feeling the effects of tariffs and opportunistic price hikes. Allianz Trade estimates tariffs and domestic factors contributed about 0.1 percentage points to CPI inflation between March and August 2025. In particular, consumers paid an additional 3.6% for durable goods such as furniture, and between 1.2% and 2.3% more for cars, clothing, jewelry, and footwear. In the long term, Allianz Trade expects price pressures to intensify, as permanent tariffs on goods and key raw materials make it harder for retailers and U.S. manufacturers to maintain prices of cars, electronics, furniture, and textiles in the second half of 2025. Next year, retail sales growth in the U.S. is projected to slow to just below 2%, with retail volumes rising only 1–3%, as more costs are passed on to consumers.
Most of the increased tariff revenues concern consumer goods. U.S. customs authorities collected $165 billion in tariffs this year, compared with just $69 billion in the same period last year. Apart from tariffs, the weakening dollar has also contributed to higher prices for imports, driving up duties paid on consumer goods and intermediate products. Within just a few months, tariffs as a share of consumer imports rose from around 4% to about 15% — an unprecedented increase that will pressure households, even though the impact on demand has so far been limited. This could also widen the gap between what U.S. consumers and companies pay and what foreign suppliers receive. Where suppliers have pricing power, U.S. firms may pass costs directly to buyers, adding to household budget pressures.
Who Pays the Tariff Bill?
Producer prices in the U.S. have exceeded import prices across most product categories. Although importers are the ones directly charged, higher costs can be spread along the supply chain: exporters may lower prices, importers may hold them steady, or U.S. consumers may pay more. Allianz Trade’s analysis shows that in 77% of products, the burden falls on consumers and/or foreign exporters, since domestic prices rose faster than import prices (examples include coffee, beverages, consumer electronics, clothing, sporting goods, toys, and jewelry), or import prices even fell (e.g., animal feed, sugar, paper, frozen foods, pasta). For the remaining 23% of products, mainly food items such as cereals, sweets, and dairy, U.S. importers absorbed the costs due to strong domestic competition and consumer price sensitivity.
Additional tariff-related costs contributed around +0.1 pp to U.S. CPI inflation between March and August 2025. Consumers bore extra costs of 3.6% for furniture, 2.3% for clothing, 1.8% for jewelry, 1.4% for footwear, and 1.2% for motor vehicles. Even niche products like wine rose by 1% more than import prices alone would suggest. However, not all sectors saw higher costs — in some cases, strong competition and importers’ cost absorption led to lower-than-expected price increases, such as pharmaceuticals and confectionery.
Impact on Retailers and Wholesalers
The retail sector shows how tariffs affect business profits. Wholesalers’ operating margins rose to 3.7% in Q2 2025 from 1.8% in Q1, while food retailers’ margins increased to 4.6% from 3.5%. Discount chains like Walmart and Costco saw little change, suggesting that firms not focused on rock-bottom prices — or those serving business clients rather than consumers — could pass on more costs. Some analysts have even dubbed this phenomenon “Greedflation 2.0,” as wholesalers in less competitive environments use tariffs to maintain elevated margins for longer.
Overall price moderation allowed U.S. retail to record solid growth of +2.5% year-to-date by July 2025, mainly due to higher volumes rather than prices. Exemptions, careful stock management, and exporters absorbing costs helped contain inflation. Consumer confidence dropped about 15% below last year’s peak and 25% below pre-pandemic levels, but stable prices encouraged spending. A strong labor market and expectations of Fed rate cuts further supported consumption, despite a temporary 90-day tariff freeze and subsequent hikes in early summer.
In H2 2025, sectors most dependent on imports — automotive, electronics, furniture, and textiles — are likely to raise prices further. Electronics producers face rising costs for high-performance chips and AI integration, while clothing and textile retailers, who relied on early-year stockpiling, will see tariffs hit new shipments. Automakers also accelerated sales before tariffs increased, meaning weaker demand ahead.
Shift in Supply Chains
U.S. imports from China have dropped 19% year-to-date, cutting China’s share of imports to 9% from 13% a year earlier. Consumer electronics imports fell 36.5%, furniture imports 25.5%, and clothing 21%. But this has not led to reshoring production back to the U.S. Instead, companies turned to Vietnam, India, and Thailand for computers, phones, clothing, and footwear, increasing volumes from those countries by 20% or more. Vietnam overtook China as the largest footwear supplier, now holding 35% of the U.S. market.
These shifts confirm that tariffs do not reduce foreign dependence but reallocate it, raising costs. Looking ahead, Allianz Trade expects U.S. economic growth to slow to just below +2% in 2025 and 2026, with consumer price inflation remaining moderate (below 3% through 2026). With interest rates staying high, retail volumes are projected to grow only 1–3% in H2 2025 and in 2026, supported by wage growth and a strong labor market, even as tariffs push prices higher. Effective tariff rates are set to rise further, testing retailers’ ability to absorb costs. Supply chains will continue diversifying within Asia rather than returning to the U.S., balancing cost savings with geopolitical risks. For consumers, this means slower price growth in some categories and sharper shocks in others. The so-called “domestic premium” — higher tariff revenues — remains a hidden tax of the current trade system.
Sources: USITC, BLS, US Census Bureau, US BEA, Bloomberg, Allianz Research
Source Article: CEO.com.pl
