Co-blogger Jon Murphy, in “Why Should Individuals Pay Tariffs?” Might 29, 2025, factors out that U.S. tariffs are largely paid by Individuals. He cites the related literature.
He then goes on to notice that commerce happens between people and corporations, not nations. That is true and necessary, however it’s not related to the difficulty of who bears the burden of tariffs.
A tariff is a tax. There’s an easy solution to assess who bears the burden of a tax: have a look at the elasticities of demand and provide.
If our elasticity of demand is low and the exporters’ elasticity of provide is excessive, then we Individuals bear many of the burden of the tax. But when our elasticity of demand is excessive and the exporters’ elasticity of provide is low, then the exporters bear many of the burden of the tax.
Right here’s what I wrote on that problem in “Tariffs Will Harm Canadians and Individuals Alike,” Defining Concepts, December 19, 2024:
Many individuals who’ve, like me, been vital of tariffs, have claimed that US shoppers bear the entire price of the tariff. Writing in August 2019, for instance, Rachel Layne of CBS Information said, “The actual fact is, corporations right here pay tariffs to US Customs and Border Safety when Chinese language items attain America’s shores.” It’s true that Individuals write the checks. However one of many first issues about taxes that we economists train undergrads is that figuring out who writes the verify tells you precisely nothing about who bears the burden of a tax. What determines the break up of the burden between producer (exporter) and shopper (importer) is their relative elasticities of provide and demand.
Contemplate Canadian oil. On the one hand, many Individuals within the Midwestern states depend on oil from Canada. In response to the tariff, although, they are going to in all probability have oil shipped by practice from different elements of the US. That’s costly, however it’s a solution to alter. However Canadian oil producers have few different prospects to promote to apart from Individuals. This lack of fine choices makes their elasticity of provide low. They’ll probably take in most of the price of the tariff by not elevating costs very a lot. The consequence? Canadian oil producers would bear greater than half of the burden of the tariff on oil. The result will rely upon the products in query. The truth that so many Canadians are sweating the tariffs that Trump is threatening means that they suppose they are going to bear a considerable a part of the burden.
As a generalization, it’s in all probability true that we U.S. shoppers bear many of the burden of the tariffs that the U.S. authorities imposes. However there’s no necessity for that. It’s an empirical problem.
Jon rests plenty of his argument on methodological individualism. However noting the relevance of elasticities of demand and provide doesn’t contradict methodological individualism.
