Fashion
US tariffs hit domestic economy, not foreign exporters
US import tariffs are paid by Americans, not foreign exporters contrary to official rhetoric, according to new research from the Kiel Institute for the World Economy. The study finds that 96 per cent of tariff costs are borne by US importers and consumers, acting like a domestic consumption tax that raises prices, shrinks product variety, and depresses trade volumes.
US import tariffs are largely paid by Americans, not foreign exporters, according to a Kiel Institute study.
Around 96 per cent of tariff costs are borne by US importers and consumers, functioning like a domestic consumption tax.
Analysis of 25 million shipments shows trade volumes fell sharply while export prices stayed firm, including a 24 per cent drop in Indian exports to the US.
“The tariffs are an own goal. The claim that foreign countries pay these tariffs is a myth. The data show the opposite: Americans are footing the bill,” said Julian Hinz, research director at the Kiel Institute and one of the authors of the study.
The research, analysing over 25 million shipment records worth nearly $4 trillion, showed US customs revenue rose by around $200 billion in 2025, while foreign exporters absorbed only four per cent of the burden. Trade volumes collapsed, but export prices did not fall, indicating exporters did not offset tariffs through discounts.
Examining unexpected tariff hikes on Brazil and India in August 2025, the study found Indian exports to the US fell by up to 24 per cent in value and volume, while unit prices remained unchanged.
“We compared Indian exports to the US with shipments to Europe and Canada and identified a clear pattern. Both export value and volume to the US dropped sharply, by up to 24 per cent. But unit prices—the prices Indian exporters charged—remained unchanged. They shipped less, not cheaper,” Hinz explained.
Researchers conclude that tariffs squeeze US company margins, raise consumer prices, and force exporters to seek alternative markets, ultimately disadvantaging all sides.
Fibre2Fashion News Desk (HU)
The global consultancy said 2026 will be defined by resilience in domestic consumption, decisive policy reforms, and recalibration of trade strategy, as India navigates spillover effects from protectionist shifts in advanced economies, volatile capital flows, and higher tariffs on select exports.
Despite global uncertainty and rising trade frictions, India is expected to outpace peer economies, supported by low inflation, robust consumption, and sustained public investment.
Deloitte cautioned that delayed trade deals and US tariffs could cap export growth, reinforcing the need for supply-side reforms to build long-term resilience.
Despite these headwinds, India maintained strong momentum in the first half of fiscal 2025-26, recording 8 per cent growth, driven by robust private consumption and investment. Inflation averaged 1.8 per cent, its lowest level in a decade, boosting real incomes and consumer confidence.
Private consumption rose 7.9 per cent year-on-year (YoY) in the second quarter (Q2), supported by tax relief, goods and services tax (GST) rationalisation, and favourable monsoon conditions. At the same time, government capital expenditure accelerated, with utilisation reaching 51.8 per cent in the first half of the fiscal, lifting gross fixed capital formation growth to 7.6 per cent.
On the production side, gross value added (GVA) expanded 8.1 per cent in Q2, led by manufacturing growth of 9.1 per cent and services growth of 9.2 per cent.
Deloitte noted that policy co-ordination played a central role in cushioning the economy. Fiscal measures focused on boosting disposable incomes and sustaining infrastructure investment, while the Reserve Bank of India (RBI) delivered a cumulative 125-basis-point rate cut in 2025 to support credit growth and domestic demand. The long-pending labour codes, implemented in 2025, are expected to improve ease of doing business and accelerate job formalisation.
On the external front, India continued to diversify trade partnerships through agreements with the UK, New Zealand, Oman, and European Free Trade Association (EFTA), while expanding engagement with emerging markets across Africa, Southeast Asia, and West Asia. However, delays in the proposed United States (US)-India trade agreement remain a key risk for exporters.
Deloitte estimated that in the absence of a US-India trade agreement, American tariffs could shave 0.3-0.4 per cent of Gross Domestic Product (GDP) from Indian exports, likely keeping goods export growth subdued in the near-term.
Looking ahead, policy priorities must transition from demand-led support to supply-side reforms such as GST 2.0, improved logistics efficiency, and productivity gains to sustain growth and strengthen resilience against future global shocks, Deloitte noted.
Fibre2Fashion News Desk (CG)
The US House has passed the AGOA Extension Act, extending till December 31, 2028, duty-free access to the US for most exports from sub-Saharan Africa.
The bill also extends till December 31, 2031, customs user fees and merchandise processing fees.
The Haiti Economic Lift Programme Extension Act was also passed, extending till December 31, 2028, the special duty-free rules for apparel imported from Haiti.
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Industrial production grew at 0.7 per cent YoY in the fourth quarter (Q4) last year.
US industrial production rose by 0.4-per cent month on month (MoM) and 2 per cent YoY in December 2025, the Federal Reserve said.
Industrial production grew at 0.7 per cent YoY in the fourth quarter (Q4) last year.
The industrial production for textiles in the country fell by 1.1 per cent MoM and 1 per cent YoY in December, while the same for clothing declined by 0.9 per cent MoM and 0.7 per cent YoY.
Manufacturing output rose by 0.2 per cent MoM and 2 per cent YoY in December, but declined by 0.7 per cent YoY in Q4 2025, a Fed release said.
Capacity utilisation for US manufacturing was unchanged in December at 75.6 per cent, a rate that is 2.6 percentage points (pps) below its long-run (1972-2024) average.
The industrial production for textiles in the country fell by 1.1 per cent MoM and 1 per cent YoY in December, while the same for clothing declined by 0.9 per cent MoM and 0.7 per cent YoY.
Fibre2Fashion (DS)
Indian economy to grow 7.5-7.8% in FY2025-26: Deloitte
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US tariffs hit domestic economy, not foreign exporters
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