US tariffs fall mostly on American firms and consumers, ECB analysis finds

Statutory US effective tariff rate rose from 3% to over 18% (18.2% in Nov 2025) while customs-based effective rate was 9.8%; exporters pass through ~95% of tariff increases, so foreign firms absorb ~5%. US consumers currently bear ~33% of the burden (could exceed 50% long-term), US firms would shoulder ~40% over time; a 10% tariff increase raises traded prices ~9.5% and is associated with a -3.7 aggregate volume elasticity (10% tariff → 37% drop in volumes). Automotive trade restructured toward Canada/Mexico while EU and Japan saw lower unit values and sharp volume declines; for goods still traded under tariffs, a 10% tariff → 4.3% volume reduction.

Analysis

The tariff shock is not just a headline cost shift — it is accelerating supply‑chain reconfiguration and inventory resets that will play out unevenly across months and into years. Expect multi‑stage margin compression: first, importers and distributors absorb hits and run down inventories, then producers reprice or re-source, and finally consumers reallocate spending; this sequencing creates a window (3–9 months) where logistics volumes and retailer earnings diverge from long‑run trade pattern changes.

Nearshoring is the clearest structural response and will disproportionately reward firms that are integrated into North American supply ecosystems — tier‑1 auto suppliers, regional freight/rail operators and manufacturing services that can redeploy capacity quickly. Conversely, businesses with inflexible Asia‑heavy sourcing, long lead‑time procurement, or exposure to discretionary durable goods are likely to see demand elasticity bite harder and inventories markdowns persist, pressuring margins and working capital.

Macro knock‑ons include a bifurcation between goods and services inflation and a potential temporary drag on headline GDP from collapsed import volumes; central banks may view lower volumes as disinflationary even as unit‑price pass‑through keeps some goods inflation sticky. Currency and freight markets will act as transmission belts — CAD/MXN should receive support from rerouted trade flows, while ocean freight and transpacific integrators face a risk of structural volume decline rather than a short hiccup.

Key Decisions for Investors

• Long MGA (Magna International) via 9–12 month call spread (buy near‑ATM LEAP, sell higher strike to fund cost). Rationale: direct beneficiary of North American vehicle reshoring and OEM footprint shift; reward if NA content share rises, risk is auto demand cyclical downturn — structure limits premium outlay while preserving upside exposure.
• Long APTV (Aptiv) outright or via 9–12 month calls. Rationale: tier‑1 electronics/EV wiring harnesses benefit from nearshoring and higher local content; downside is auto volume risk and semiconductor bottlenecks — keep position size to a single‑digit % of sector allocation and hedge with a short auto OEM put if equity rally overshoots.
• Short UPS (or buy 3–6 month put spread on UPS) to express transpacific volume slide and margin pressure in global logistics. Rationale: integrators suffer disproportionate earnings volatility from lower import TEUs; use defined‑risk put spread to limit premium and target >2:1 payoff if volumes remain depressed.
• Buy regional exposure to Mexico/Canada via EWW (iShares Mexico) and EWC (iShares Canada) versus a US equity hedge over 6–12 months. Rationale: currency and export‑driven equities should reprice upward as supply chains reroute; pair with S&P futures hedges to isolate FX/nearshoring upside.