Source: EconLog
by Jon Murphy
“A major assertion by the Trump Administration is that tariffs are paid for by foreigners. And, indeed, under very specific circumstances, a tariff may be paid in part or in whole by a foreign producer: * if the importing country is a monopsony (or has significant market power), * if the exporting country has price power, and * if there is no foreign retaliation,
then a sufficiently small tariff could induce the exporting country to lower prices in order to retain market share. … At least on paper, the US seems to fit the description. We are one of the largest countries in international trade. … So, at least in theory, there should be some part of a US tariff that is eaten by the foreign producer. At yet, that is not the case in reality.” (05/29/25)