The real cost of an own goal

This week, the ARA reported on a study by four German economists analyzing millions of import transactions in the United States. The conclusion was devastating: between 94% and 96% of the cost of the tariffs imposed by Washington has not been borne by foreign exporters, but by Americans themselves. Prices have not fallen. They have risen. The tariffs have functioned as a hidden internal tax. An own goal. Read this way, the message seems reassuring for Europe. If the tariffs are paid by Americans and everything remains more or less the same, the damage is limited. This interpretation is incomplete. And, above all, misleading.

European exports to the United States have indeed fallen sharply in numerous sectors. Eurostat data shows significant, double-digit declines over the past year. And yet, US GDP has continued to grow. What has happened is more troubling for Europe. First, a significant portion of European imports has been replaced by imports from third countries, not by US production: Mexico, Vietnam, India, South Korea. Trade hasn't returned home. It's been diverted. Europe has lost market share. Others have gained it. The United States has continued buying from abroad.

Second, another part of the adjustment has been converted into tax revenue. If the tariff is paid by the American consumer, that money doesn't disappear. It goes into the public coffers. And in a country with a very expansionary fiscal policy, that revenue ends up supporting spending, investment, and economic activity.

Third, US consumption hasn't been destroyed, it's been shifted: fewer expensive imported goods and more services; less of some products, more of others. The total volume of spending remains the same. Its composition is changing. GDP continues to grow without the need for major reindustrialization.

The overall result is this: Europe loses exports. The US doesn't gain industry. Other countries gain market share. And the American consumer foots the bill while the government redistributes it. This is the real "own goal" suggested by the German study, although it isn't always emphasized enough. This is less true for the United States, which has managed to cushion the blow, than for Europe, which has been caught between a protectionism it can't emulate and a loss of commercial weight that it is suffering. The tariffs haven't been neutral; they've changed the map, and Europe hasn't emerged stronger. We still need a few months to fully assess what has happened, but, for now, European industry appears to be the biggest loser in this story.