Who has to pay the US tariffs? – Commerzbank

Economics normally suffers from a painful deficiency: unlike biologists, physicists, psychologists, and other scientists, economists are generally unable to conduct experiments. For example, Christine Lagarde is not going to raise or lower the ECB's key interest rate just so that we can better calibrate our econometric models. This makes economics difficult, but also exciting. Sometimes, however, chance provides us with situations that are pretty close to an experiment. One that we could hardly have imagined better for testing our theories, Commerzbank's Head of FX and Commodity Research Ulrich Leuchtmann notes.

Trust in US Dollar and Treasuries is at risk

"If the US president were right in his earlier theory that foreign exporters bear the tax burden of US import tariffs, then when new tariffs are imposed, the prices of imports should fall by exactly the same amount as the tariff rate. On Friday, the Bureau of Labor Statistics published import prices for April, i.e., for a period largely after 'Liberation Day,' the day on which the US president significantly raised import tariffs. And lo and behold: import prices did not fall. In fact, they rose very slightly in April: by 0.1%."

"People still ask me what trade policy plan this US administration is pursuing. I am firmly convinced that it has no plan. There are a few vague preconceptions ('tariffs are good'), drastic measures based on them (“Liberation Day”), and then abrupt adjustments when disastrous consequences become apparent here and there—as rational observers could have foreseen."

"There is a growing risk that measures will eventually be taken whose consequences are irreversible. US government bonds are a 'safe haven' because everyone can trust that everyone else considers them a 'safe haven.' Once this trust is lost, it will not return quickly. The same applies to the dollar's status as the world's reserve currency. And to confidence in the independence of the Fed. In all cases, there are tipping points beyond which there is no going back to the status quo ante."