U.S. President Donald Trump threatened to impose an additional 10% tariff starting February 1 on eight European countries—Denmark, Germany, Norway, Finland, the UK, France, Sweden, and the Netherlands—over the Greenland issue. These countries currently have around 10 personnel deployed in Greenland. This new tariff would be added to the existing 15% tariff on the European Union (EU). Trump also stated that the ‘Greenland’ additional tariff would rise to 25% by June 1, until Greenland comes under U.S. control.
Last year, the U.S. collected $200 billion in additional tariff revenue. Scott Bessent, U.S. Treasury Secretary, revealed in August last year that the U.S. government expected to collect between $750 billion and $1 trillion in tariff revenue by June of this year. Trump had previously claimed,
“These historic tariffs will be paid by foreigners.”
However, the Kiel Institute for the World Economy in Kiel, Germany, announced on the 19th, “While the U.S. collected $200 billion in additional tariff revenue last year, 96% of the increased tariff costs were actually borne by Americans, with only 4% shouldered by foreign exporters who lowered their export prices.” This suggests that U.S. tariffs function like a consumption tax on its own citizens.
Relatedly, the Wall Street Journal (WSJ) reported on the 20th that U.S. tariff hikes are likely to manifest as rising consumer prices over time. The Kiel Institute’s findings align with recent studies by the Yale Budget Lab and Harvard Business School scholars, which showed that foreign producers bear only a small portion of tariff costs.
The WSJ noted that these findings imply Trump could be at a disadvantage in the trade war with Europe. The Kiel Institute analyzed approximately $4 trillion in trade volume from January 2024 to November 2025 and found that foreign exporters covered only 4% of tariff costs through reduced export prices, while U.S. consumers and importers bore 96%.
Trump aimed to enhance U.S. bargaining power and pressure foreign governments into negotiations through tariff hikes. However,
the tariffs effectively operated as a consumption tax on Americans rather than a levy on foreign producers.
Julian Hinz, a Bielefeld University economics professor and co-author of the study, told the WSJ, “The concept of transferring wealth from foreigners to the U.S. through tariffs does not exist, and inflationary pressures in the U.S. will grow over time.”
Yet, the U.S. consumer price index in December last year was 2.7%, lower than 2.9% during the same period the previous year. A Harvard Business School study found that only 20% of tariff hikes were reflected in consumer prices six months later, with the remainder absorbed by U.S. importers and retailers. Thus, prolonged tariff increases and additional levies will inevitably drive up U.S. prices.
Why have foreign exporters not lowered their prices to maintain access to the lucrative U.S. market? The Kiel Institute authors suggested three possibilities: foreign exporters may have found buyers in other countries, maintained current prices in anticipation of tariff reversals, or U.S. importers reduced their margins to preserve long-standing relationships with foreign exporters.
Trump’s tariff hikes reduced India’s exports to the U.S. by 18–24% and sharply contracted Germany’s previously surging exports over the past year. A Capital Economics report released on the 19th warned that if the 10% additional tariff on the EU is implemented, the bloc’s GDP could decline by 0.2–0.5%.
The Kiel Institute also projected that if the U.S. tariff policy continues long-term, American importers will seek competitive foreign suppliers, eventually forcing foreign exporters to bear a larger share of tariff costs.
Currently, the U.S. Supreme Court is reviewing whether Trump’s use of the International Emergency Economic Powers Act (IEEPA) to impose broad tariff authority was legal. The Constitution grants Congress sole authority over taxes and tariffs, raising questions about whether Trump’s use of emergency tariffs as a routine diplomatic pressure tool is justified.
In May last year, a lower court—the International Trade Commercial Act Court—ruled that the tariff measures exceeded IEEPA’s authority.
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