Higher U.S. tariffs did little to force foreign exporters to lower their prices, but rather prompted U.S. importers to shift to cheaper, partly lower-quality products, according to an IMF working paper.
The research finds that US tariffs were largely passed on to import prices, with exporters absorbing only a small portion of the additional cost. Instead of lowering their pre-tariff prices to remain competitive, foreign suppliers have largely maintained their prices, leaving American importers able to adapt by providing less expensive alternatives.
According to the study, the observed decline in total import prices was not driven by exporters offering discounts but by the reallocation of imports towards lower-priced suppliers and products. The authors note that this compositional shift also reflects a movement toward lower-quality imported items, a pattern that was similarly observed during the 2018-2019 US-China tariff episode.
Using detailed transaction-level U.S. customs data covering tariff increases introduced in 2025, the study found that the average pass-through of tariffs into import prices remained close to complete. Exporters reduced their pre-tariff prices only marginally, suggesting that the burden of higher tariffs was largely borne by changes in sourcing rather than pricing.
The study indicates that the shift towards lower-quality imports has broader implications beyond trade flows. The report notes that low-quality imported intermediate inputs can affect firms’ productivity, while consumers may also experience a decline in product quality even if average import prices appear lower.
The results suggest that tariffs changed the composition of US imports rather than providing significant price concessions from foreign exporters. As importers diversify their sources of imports away from high-priced suppliers, the resulting decline in average import prices reflects changes in the import basket rather than lower prices charged for similar products.
Since returning to office in 2025, US President Donald Trump has dramatically expanded tariffs on imports from several trading partners, arguing that higher tariffs would encourage domestic production and improve America’s trade position. The IMF paper examines how these tariff increases will affect import prices and supply patterns.
The findings come as the United States has imposed higher tariffs since April 2025 on imports from several trading partners, including India, as part of a broader tariff policy under President Donald Trump. India has been engaged in trade negotiations with Washington while seeking an exemption from these duties and concluding a bilateral trade agreement in the near future.
This study was authored by IMF economists Jaeben Ahn, Lorenzo Rotunno, and Michele Rota. The report indicates that the analysis is based on the research of IMF experts and that the opinions expressed are those of the authors and do not necessarily represent the views of the International Monetary Fund, its Executive Board, or the Fund’s management.
