Chart of the week: who will pay the price?

Data-driven insights and analysis from our investment team every week.

As we think about higher tariff levels in the US, it is unclear how exporters to the US will deal with them. Will exporters reduce prices to offset some or all of the impact or will they pass on the tariff rates to their US customers? Some tariffs have been implemented over the last couple of months so we can get a sense of the initial reaction of some exporters to the USA.

This week’s chart shows the prices paid by the US for its imports. You can see that there has been no reduction in the prices that exporters demand to supply goods to the US. It does not appear that exporters are in any way absorbing the cost of tariffs, they are passing on the full amount. Behaviours might change when tariffs become broader or higher. We will monitor this, but early indications show that US businesses and consumers will face the full cost of the tariffs. For the rest of the world, there is a concern that this will lead to a reduction in demand from the US.