The Price of Protection
The economic bill for aggressive trade protectionism has finally come due, and it is the US consumer who is being asked to pay. Yesterday the Conference Board reported that the Consumer Confidence Index has fallen to 84.5, its lowest level in twelve years. Confidence now sits below the troughs reached during the worst months of the 2020 pandemic, reflecting a public increasingly strained by persistent sticker shock, mounting anxiety over a sluggish labour market, and the rising cost of imported essentials.
Trade barriers are often presented in political rhetoric as a tax imposed on foreign competitors. In practice, the evidence points to something closer to a self-inflicted wound. A recent study by the Kiel Institute, examining 25 million shipments with a combined value of $4 trillion, found that foreign exporters absorbed just 4% of tariff costs. The remaining 96% was passed directly on to US firms and households. In 2025 alone, this translated into what amounted to a $200 billion consumption tax borne domestically. While companies such as Ford and General Motors have disclosed tariff related costs running into the billions, the ultimate burden has filtered through supply chains and landed with consumers.
The long-held assumption that foreign producers would cut prices to preserve access to the US market has also been decisively challenged. Rather than absorbing losses, many exporters are choosing to withdraw altogether. Following the increase of tariffs on Indian and Brazilian imports to 50% in August 2025, export prices showed little sign of adjustment. Instead, volumes shipped to the United States fell by 24%, underscoring a clear unwillingness to subsidise US trade policy.
These exporters have not disappeared but have reoriented towards more predictable markets. The landmark EU-India Free Trade Agreement sealed this week, alongside broader signals of supply chain reconfiguration discussed at Davos, illustrates a global system that is actively diversifying away from US centric trade. The consequence for the American market is reduced choice and higher prices for the goods that remain available.
The sharp deterioration in consumer confidence is therefore less a mystery than a reckoning. As foreign suppliers demonstrate their readiness to abandon the US market rather than absorb tariffs, American households are left footing the bill. The much-touted promise of costs paid abroad has materialised instead as a direct drag on domestic prosperity.
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