What Impact Do Tariffs Have on U.S. Economy? ECB Official Breaks Down the Numbers

A recent analysis from a Bank of Italy governor and European Central Bank Governing Council member provides crucial insight into how tariffs have reshaped the American economic landscape. According to the assessment shared in Venice this past weekend, the tariff burden reveals an interesting distribution pattern that extends across multiple economic actors.

The Weight of Tariffs: Who Bears the Load?

The data shows that while U.S. businesses initially absorbed most of the tariff-related losses through reduced profit margins, this situation has gradually shifted. Foreign exporters have shouldered roughly 10% of the total tariff costs, demonstrating how the burden doesn’t concentrate in one place. As time progressed, companies found themselves unable to absorb all costs internally, prompting a gradual transmission to consumers. Today, consumers have come to carry approximately half of the tariff burden, illustrating how trade policies ultimately impact household purchasing power.

Inflation Connection: How Tariffs Have Fueled Price Growth

The inflationary consequences of these tariffs have been quantifiable. Economic calculations indicate that tariffs have contributed slightly more than 0.5 percentage points to U.S. inflation—a meaningful figure when examining the roots of price pressures. This relationship between trade policy and consumer prices demonstrates how tariff structures have direct implications for monetary policy decisions and central bank strategies. The transmission mechanism shows that tariffs don’t simply affect import prices; they have cascading effects throughout the broader economy, ultimately appearing in retail prices and cost-of-living measures for American households.