How did retaliatory tariffs from U.S. trading partners change the distribution of tariff costs across U.S. industries?
Executive summary
Retaliatory tariffs imposed by U.S. trading partners shifted a large share of the tariff burden onto U.S. exporters and downstream users rather than evenly distributing costs across the economy: agricultural producers—especially soybeans, sorghum, and pork—suffered the largest direct export losses, while manufacturing sectors faced higher input costs that raised domestic prices for downstream industries [1] [2] [3]. Empirical studies and government analyses show near-complete passthrough of tariffs into U.S. prices for many products and a reallocation of production gains toward protected upstream sectors that were more than offset by losses downstream and abroad [4] [5] [6].
1. What “distribution of tariff costs” means in practice
When partners retaliate, the economic incidence is not the same as the legal incidence: instead of a tidy tax paid abroad, retaliation functions like a tax on U.S. exports and raises costs for firms that buy tariffed inputs, shifting burdens to exporters and downstream industries that rely on imported intermediates [7] [3]. Government reports and academic work frame the effect as both a direct hit to export volumes and an indirect rise in producer and consumer prices through input-price pass-through [2] [6].
2. Agriculture took an outsized direct hit
The clearest concentration of costs fell on U.S. agriculture: six trading partners targeted U.S. agricultural and food exports in 2018–19, producing estimated annual industry losses of around $13.2 billion (ERS) and direct export losses that USDA and other analysts put at roughly $27 billion across 2018–2019 for the broader set of retaliatory measures [1] [4] [2]. Soybeans, sorghum, and pork were the headline casualties, with sizable state-level concentrations in Midwestern producers such as Illinois and Iowa [1] [2].
3. Upstream protection, downstream pain in manufacturing
Tariffs on steel and aluminum boosted domestic production in protected sectors but pushed up costs for downstream users—automotive, appliances, construction and other industries dependent on metal inputs—reducing output and employment in those downstream sectors, according to USITC and Fed analyses [5] [6]. The USITC finds some production increases in protected industries were met by larger production decreases downstream, signaling that the protective goal was partly achieved at the expense of broader industrial activity [4] [5].
4. Price pass-through was large and uneven
Multiple studies document near-complete pass-through of tariffs into U.S. domestic prices for many categories—especially consumer and capital goods—and even more than complete pass-through for intermediates in some cases, meaning firms and consumers absorbed the cost increases rather than foreign exporters [4] [8]. That uneven pass-through helps explain why some sectors could shift costs onto buyers while others saw lost market share abroad when retaliation targeted their exports [8] [3].
5. Employment and reallocation effects
Evidence shows tariffs did not produce net manufacturing employment gains; instead, employment shifted within manufacturing and declined overall in some analyses, as rising input costs and export losses outweighed any protective hiring in shielded industries [4] [6]. Some firms re-routed exports to alternative markets, partially offsetting losses to China in certain sectors, but reallocation depended on firm size, financial constraints, and product type [8].
6. Heterogeneity, timing, and measurement caveats
The distributional picture varies by product (consumer vs. intermediate vs. capital goods), by partner imposing retaliation, and by the availability of alternative export markets; models and event studies find heterogeneous responses and some reallocation to third markets, complicating any one-size conclusion [8] [9]. Reporting and model estimates also diverge—USDA/ERS, USITC, Fed, and academic papers use different windows, product definitions, and counterfactuals—so precise dollar-by-dollar allocations differ across sources [2] [5] [6].
7. Policy reactions, political incentives and hidden agendas
Political narratives framed tariffs as protecting blue‑collar industry, while trading partners targeted politically visible rural and iconic consumer sectors (whiskey, jeans, soybeans), revealing retaliators’ intent to increase domestic political pressure in the U.S.; that targeting shaped which industries bore the economic load and complicates simple “who paid” accounting [7] [10]. Relief payments to farmers and exemptions or quota adjustments for allies further redistributed observable costs across taxpayers and select firms rather than market prices alone [7] [5].
Conclusion
Retaliatory tariffs reallocated tariff costs toward U.S. exporters—most sharply in agriculture—and toward downstream manufacturers and consumers through input-price pass-through; while some upstream producers gained, the academic and government evidence indicates the net economywide distribution was regressive across sectors, with losses concentrated where export exposure and input dependence were highest [1] [4] [5]. Precise magnitudes vary by dataset and method, but the directional story—winners among protected upstream producers, losers among exporters and downstream users—holds across USDA, USITC, Federal Reserve, and academic analyses [2] [6] [8].