Was Trump Correct About Tariffs After All? – OpEd

Trump’s recent Wall Street Journal piece is not just a defense of tariffs. It is a claim of intellectual discovery in economics. He argues, in effect, that the vast majority of experts have been looking at tariffs backward, and that his critics keep repeating a superstition: tariffs are a tax on Americans. In his telling, tariffs are a way to make foreigners pay, raise revenue, boost domestic production, and still keep inflation tame.

If Trump remains fixated on the Nobel Peace Prize, he is aiming at the wrong category. His real ambition, at least on the page, is the science of economics. Even though he did not explicitly state his discoveries, we can infer the economic laws he implied and name them in his honor.

The Incidence Illusion

The first Trump Tariff law is as follows: tariffs are not taxes on domestic consumers but levies on foreigners. The second Trump Tariff law states that tariffs are not inflationary and can even be a tool for disinflation. The third law says that tariffs promote economic growth. In his article, Trump refers to empirical studies and government statistics that, in his view, substantiate his discoveries. He points to Harvard-affiliated research as support for the proposition that mainstream economics got tariff incidence wrong.

Let us examine his discoveries and the data.

Trump writes that “the burden, or incidence, of the tariffs has fallen overwhelmingly on foreign producers and middlemen, including large corporations that are not from the U.S.” The first thing that caught my eye is that he is no longer talking about foreign countries, but about companies. This is indeed progress. Second, the word “overwhelmingly” implies that the opposite outcome, the burden falling on domestic consumers, can be safely disregarded.

However, on that point, the evidence runs against the assertion. A paper referenced by Trump, by Alberto Cavallo and coauthors, uses high-frequency retail microdata to measure the short-run impact of the 2025 tariffs. In their conclusion, they state that tariffs led to both rapid and gradual increases in retail prices. Between March and October 2025, prices of imported goods rose about 6.2 percent relative to pre-tariff trends, while domestic prices rose 3.6 percent. If foreigners were quietly absorbing the tariff to preserve access to the American market, that would show up as limited retail transmission and, importantly, as downward pressure on pre-tariff border prices. Instead, the retail pattern points to higher prices for imported items, with spillovers into domestic prices as well.

The same paper makes another point that matters for Trump’s rhetoric. The magnitude of retail price increases can look modest compared with headline tariff rates, especially in the early months. But modest is not the same as zero. The authors emphasize that the direction is unambiguous and estimate that retail tariff pass-through is 24 percent, with a cumulative contribution of roughly 0.76 percentage points to the all-items CPI by October 2025. The paper itself does not report any estimate that foreign producers and middlemen “pay at least 80 percent” of the tariff cost. Instead, the authors posited, “Assuming full pass-through at the border and a 50 percent import cost share at the retail level, our results suggest that U.S. consumers paid up to 43 percent of the tariff burden, with the rest absorbed by U.S. firms.”

As for “middlemen,” who are they? They are those U.S. firms in the supply chain, including importers of record, wholesalers, retailers, and manufacturers that rely on imported inputs. By law, the importer of record is responsible for depositing duties and fees, and the liability for duties is a personal debt owed by the importer to the United States.

U.S. manufacturers that rely on imported inputs face a direct increase in the cost of production.If they restrain themselves from passing the full cost to consumers, the burden shows up as a shrinkage of profit margins. Either way, the tariff is not a foreign donation. It is a forced diversion of funds. Dollars that could have gone to R&D, expansion, hiring, or simply higher compensation and better benefits for employees are instead remitted to the Treasury before the firm even sells the finished product.

A newer and even blunter estimate arrived in January 2026 from the Kiel Institute for the World Economy. Their research concludes that importers and consumers in the United States bore 96 percent of the tariff burden, with foreign exporters absorbing about 4 percent by lowering prices. This directly contradicts the popular slogan version of the policy, the idea that foreign countries pay tariffs in any meaningful budgetary sense. 

The research on the 2018 trade war found the incidence of tariffs fell on domestic consumers and importers, with a large pass-through and measurable real income losses. You can debate magnitudes and horizons. But you cannot pretend the burden is a foreign donation. In that picture, the “foreigners pay” claim is not evident at all, and as such, the first Trump Tariff law is a bust.

The Myth of Deflation

Trump’s second law is about inflation. He points to a period of declining inflation alongside rising tariff rates and treats that as vindication. But the existence of a trend does not prove a mechanism or causality. Inflation can ease for many reasons at the same time: demand cooling in interest-sensitive sectors, productivity changes, energy price movements, inventory adjustments, exchange rate shifts, and the timing of retail pass-through. None of this requires tariffs to be counter-inflationary. It only requires that inflation is a macro outcome with many moving parts. At the same time, tariffs are one policy input whose effects can arrive unevenly and with lags. The second law does not hold water either.

Correlation Versus Causation

The third law is about causality. Trump writes as if growth occurred because of tariffs. He lists indicators, frames them as outcomes, and then assigns the cause to tariffs with confidence. That is not how causality gets discovered, especially in economics. A serious causal claim needstheoretical understandings of the observed phenomena and a method that separates tariff effects from everything else going on in the economy. Without that, tariffs become the hero of any good news simply because it suits the narrative. The third law of the Trump Tariff is also not evident.

The positive influences on growth, to the extent they exist, are more plausibly tied to other elements of Trump’s economic agenda, such as deregulation, tax reduction policy, energy production, and the broader investment cycle. But tariffs are a tax instrument. They can reshuffle production patterns and bargaining power, but they do not repeal incidence, nor do they create prosperity by mere verbal insistence. 

We all know that the article is not Trump’s own words, given what we are familiar with his style by now. But we can now clearly see the quality of the economic advice he is receiving from the people around him.

• A version of this article appeared at Independent Institute