January 23: Americans Pay 96% of Tariffs, Study Warns of Cost Pass-Through
Americans paying tariffs is back in focus after a new study found U.S. buyers absorbed 96% of the 2025 tariff costs. The finding signals near-total tariff pass-through to prices. For Canadian investors, this matters because higher U.S. prices can slow demand, compress margins, and shift supply chains. We see risk for import-heavy sectors like retail, autos, and machinery. Policy uncertainty around Trump tariffs adds volatility, so we outline what to watch and how to position in CAD.
What the new study shows
Researchers report that nearly all recent U.S. import levies showed up in final prices, with Americans paying tariffs at a 96% rate. That means duties acted like a sales tax on consumers and businesses. Retailers and manufacturers either raised prices or took a margin hit. The result aligns with prior work showing little foreign absorption when trade barriers rise.
Tariff pass-through begins at the port invoice and filters into wholesale and retail tags. Importers weigh markup choices against demand. When input costs climb quickly, companies often raise prices to protect margins. Where competition is intense, firms may delay hikes, but the math still bites earnings. Over time, most of the duty becomes part of sticker prices.
Independent coverage underscores these conclusions. Reporting summarizes that U.S. buyers, not foreign exporters, bore almost all the burden, consistent with the 96% estimate source and recent televised analysis source. The evidence base spans consumer goods and capital equipment, which helps investors assess both spending and capex sensitivity.
Why this matters in Canada
Canada sells heavily into the U.S., so Americans paying tariffs risks softer real spending on imported goods. That can weigh on Canadian exporters of parts, materials, and finished products. If U.S. firms delay orders, Canadian suppliers may see slower volumes or tighter pricing. Investors should track U.S. retail sales and durable goods data to gauge near-term revenue risk.
Tariff pass-through in the U.S. can lift North American price levels, especially for integrated supply chains. If costs spill into Canada, some categories may see higher CAD prices. That complicates disinflation and could affect the Bank of Canada’s timing on rate cuts. Watch core goods inflation, business surveys on input costs, and corporate commentary on pricing power.
A softer Canadian dollar can magnify tariff-related price increases on U.S.-priced goods, while a stronger CAD can cushion them. Cross-border shopping and e-commerce flows may also shift as relative prices change. For portfolios, currency-aware positioning matters. Consider how CAD moves interact with U.S. consumer price impact to shape earnings translation for Canadian-listed firms.
Sector watch: retail, autos, machinery
General merchandise, apparel, and electronics chains rely on imported inventory. With Americans paying tariffs, U.S. retailers may raise prices or cut promotions, pressuring traffic. Canadian suppliers selling into these channels face renegotiations and tighter purchase orders. We favour companies with private-label flexibility, diversified sourcing, and better inventory turns that can defend margins.
Auto and parts makers operate just-in-time networks across borders. Tariffs on components raise build costs, while consumer price impact can slow showroom demand. Canadian producers exposed to U.S. sales could see volume volatility. Monitor incentive levels, dealer inventories, and backlog trends. Firms with nearshore options and higher mix vehicles may outperform in a costlier environment.
For industrial equipment, tariffs lift input and finished-goods prices, influencing capex timing. U.S. buyers may delay upgrades, affecting Canadian exporters of components and tools. Watch order books, book-to-bill ratios, and backlog conversion. Companies with service revenue, spare-parts profitability, and index-linked contracts tend to cushion cost shocks better than pure product sellers.
Portfolio moves to consider
In a tariff pass-through cycle, strong balance sheets matter. We look for low net debt, consistent free cash flow, and disciplined inventory. These traits support pricing tests and cushion demand dips. Dividend sustainability and buyback capacity can also support total returns when top-line growth slows due to higher consumer prices.
Companies that can switch suppliers, re-engineer packaging, or consolidate freight can offset duty pressure. Investors should scan disclosures for multi-sourcing, vendor terms, and logistics initiatives. Stable gross margin guidance under rising input costs is a positive signal. Capital-light models with short lead times can adapt faster than asset-heavy peers.
Consider modest CAD-USD hedges where revenue and costs are mismatched. Use staggered entries instead of lump-sum buys to manage headline risk tied to Trump tariffs news. Revisit position sizes in import-reliant names and add to firms with domestic input bases. Keep cash for volatility, and track earnings calls for tariff updates and price elasticity readings.
Final Thoughts
The headline is clear: Americans paying tariffs at a 96% rate means costs mostly land with U.S. consumers and companies. For Canadian investors, that raises two linked risks. First, higher U.S. prices can cool demand, which may slow orders for Canadian exporters. Second, pass-through can support inflation, complicating rate-cut timelines and valuation multiples. Action now is practical. Prioritize firms with flexible sourcing and strong cash generation. Track U.S. retail and capex indicators, along with corporate pricing commentary. Use selective hedges where currency and cost exposures diverge. Stay diversified, keep dry powder for volatility, and reassess positions as new tariff headlines and earnings guidance arrive.
FAQs
What does 96% tariff pass-through mean for prices?
It means most of the tariff shows up in final prices paid by U.S. buyers. Importers rarely absorb the duty for long. They either lift prices or cut promotions. Over time, margins and tags adjust so consumers and business customers carry nearly all the cost.
How could this affect Canadian stocks?
Slower U.S. spending can trim sales for Canadian exporters. Import-reliant sectors may guide cautiously on margins. Companies with flexible sourcing, strong cash flow, and service revenue often defend profitability better. Watch earnings calls, gross margin trends, and commentary on pricing, inventory, and demand elasticity.
Which sectors are most sensitive to tariff pass-through?
Retail, autos, and machinery are sensitive, given imported inputs and price competition. Consumer electronics and apparel often react quickly as promotions change. Industrial equipment may see delayed orders. Firms with pricing power and diversified suppliers usually handle cost shocks better than those with single-source exposure.
How should investors manage currency risk around tariffs?
Match currency of revenues and costs where possible, and consider partial CAD-USD hedging. Favour companies that disclose natural hedges through local sourcing. Monitor CAD moves, as a stronger or weaker dollar can offset or amplify tariff-driven costs and reported earnings for Canadian-listed names.
Disclaimer:
The content shared by Meyka AI PTY LTD is solely for research and informational purposes. Meyka is not a financial advisory service, and the information provided should not be considered investment or trading advice.
