The True Cost of Tariffs: Understanding How American Consumers Bear the Economic Burden and Starve Crypto Markets

Recent economic research has exposed a striking reality about who actually pays for tariffs. According to a study by Germany’s Kiel Institute for the World Economy analyzing US tariff data from January 2024 through November 2025, the burden borne by American consumers and importers is staggering—representing 96% of total tariff costs. Foreign exporters, by contrast, shoulder just 4% of the economic load. This $200 billion tariff bill is almost entirely settled on American soil, contradicting the narrative that foreign producers absorb these costs.

How Tariff Economics Really Work: The Burden Falls on US Importers

The mechanics behind tariff costs reveal why Americans bear such a disproportionate share. Foreign exporters don’t absorb the tariffs by raising their prices. Instead, they keep prices stable but reduce shipment volumes, effectively passing the burden directly to US importers at the border. These American businesses then face a difficult choice: absorb the tariff costs themselves or pass them along to consumers.

Within the first six months of tariff implementation, only about 20% of these costs make it into consumer prices. The remaining 80% is borne by retailers and importers who compress their profit margins to maintain competitiveness. This squeezing of margins means businesses have less revenue available for growth, investment, and expansion. The immediate effect is a contraction in business spending power, followed by reduced consumer purchasing ability as companies cut costs.

The Hidden Liquidity Crisis: When Tariffs Drain Capital from Financial Markets

What often goes unnoticed is the secondary effect of tariff-driven cost absorption: the depletion of liquid capital. As American consumers and businesses dedicate more income and revenue to covering tariff costs, the disposable funds available for speculative investments—including cryptocurrency—diminish significantly. This capital that would have flowed into crypto markets is instead consumed by higher product prices and squeezed business margins.

The timing is telling. Beginning in October 2025, the crypto market entered a distinctive holding pattern characterized neither by crashes nor rallies, but by stagnation. This liquidity drought reflects the broader economic squeeze borne by the US economy as tariff costs drain discretionary spending. Market participants have less excess capital to deploy, resulting in reduced trading volumes, muted price movements, and a market essentially frozen in limbo.

Why This Matters for Crypto Investors

The connection between tariff policy and crypto market performance reveals how macroeconomic conditions shape asset demand. When the burden of tariffs falls primarily on consumers and businesses rather than foreign exporters, it creates a multiplier effect: less disposable income leads to less speculative capital, which leads to stagnant crypto markets. Understanding this chain of causation helps investors recognize that current market conditions reflect not market sentiment alone, but real constraints on available liquidity driven by policy decisions.