What evidence exists on foreign exporters absorbing tariff costs (foreign incidence) during the 2025 tariff episode?
Executive summary
Evidence on whether foreign exporters absorbed any of the 2025 U.S. tariff increases is mixed: high-frequency import-price data and several empirical studies point to little foreign incidence so far, but official projections and some institutional estimates allow for small amounts of exporter price-cutting (single-digit percent of the tariff) that slightly temper the burden on U.S. buyers [1] [2] [3].
1. Import-price patterns: headline data point toward domestic passthrough
Short-run import-price series compiled by Yale’s Budget Lab show dollar-denominated import prices excluding tariffs rose above pre-2025 trends, a pattern inconsistent with large foreign absorption of tariffs; when prices are measured in foreign currencies the series rose late in 2024 and then fell in early 2025, but that recent decline is “almost but not quite statistically significant” and does not definitively demonstrate proactive price cuts by foreign producers [1]. The Budget Lab therefore concludes import-price movements so far are “more consistent with very low foreign incidence,” though it flags exchange-rate swings as a confounder [1].
2. Official forecasts: agencies allow for modest foreign price reductions
Macroeconomic modelers and budget offices have incorporated nonzero foreign incidence into projections: the Congressional Budget Office updated its projections in November 2025 to assume foreign exporters reduce their prices by an amount equivalent to about 5 percent of the tariff increase — a small but nontrivial offset that reduces the projected impact on U.S. import costs and raises tariff revenue estimates relative to earlier forecasts [3]. That 5 percent figure is explicitly presented as consistent with past evidence from tariff changes on China in 2018–19, not direct measurement of the 2025 episode [3].
3. Empirical literature and central-bank briefs: pass-through largely to domestic buyers
Central bank and Fed-area analyses emphasize that empirical research typically finds high pass-through of tariffs into domestic prices — often near 100 percent — implying the burden falls mainly on U.S. consumers and firms rather than foreign exporters; the Richmond Fed summarized this mainstream finding and reinforced survey evidence showing firms reacted to higher import costs in early 2025 [2]. Those research-based priors anchor many assessments that foreign incidence, if present, is likely small in most sectors [2].
4. Private-sector estimates and alternative numbers: a range of plausible shares
Private institutions have offered a range of point estimates that differ from academic priors: for example, widely cited calculations attributed to Goldman Sachs (reported in an encyclopedic summary) suggested a split where roughly 20 percent of tariff incidence falls on foreign exporters, with the remainder borne by U.S. consumers and firms — a substantially larger foreign share than CBO’s working assumption but still minority absorption [4]. Think-tank simulations and trade-model scenarios emphasize that incidence can vary sharply by sector, product fungibility, and the scope of retaliatory measures, meaning aggregate shares mask large heterogeneity [5] [6].
5. What the evidence together implies — and the holes that remain
Taken together, timely import-price series and conventional empirical priors point to low foreign incidence overall in the early months of the 2025 episode, while official budget modeling and some private estimates leave room for small exporter price cuts (roughly single-digit percent to, in some private tallies, low tens of percent) that modestly offset U.S. price increases [1] [3] [4] [2]. Crucially, the strongest direct evidence — micro price-setting behavior by exporters across affected product lines — is thin in the public record, and exchange-rate movements, phased exclusions, and supply-chain adjustments complicate attribution; Yale explicitly warns that recent currency-adjusted declines “are almost but not quite statistically significant,” and CBO’s 5 percent is a projection grounded in prior episodes rather than a direct estimate of exporter actions in 2025 [1] [3]. Multiple credible voices therefore converge on a cautious conclusion: foreign exporters absorbed only a small share of the 2025 tariff increases on aggregate, with important sectoral exceptions and substantive uncertainty remaining in the data [1] [2] [3].