Economist Gita Gopinath points to new IMF study showing U.S. tariffs are making Americans buy more for less; ‘No good news’
famous economist Former Vice Managing Director of the International Monetary Fund (IMF) Geeta Gopinathdrew new attention to Research The newspaper said this brought bad news to American consumers who were the first to bear the brunt. tariff.
in a Post on X, She shared an International Monetary Fund working paper that showed tariffs were causing a decline in the quality of U.S. imports. She said tariffs have done little to lower the price of exports to the United States, with buyers instead switching to cheaper, lower-quality imports. this means American Now pay a higher tariff-included price while getting a lower quality product.
this International Monetary Fund Working Papers The authors she mentioned are researchers JaeBin Ahn, Lorenzo Rotunno and Michele Ruta. It takes a closer look at how U.S. tariff increases in 2025 will affect import prices, and the findings raise new questions about who really pays the cost.
Here’s what the study explains:
Exporters are not lowering prices, so tariffs directly increase costs
The study examined detailed import and tariff data from the U.S. monthly census from February to December 2025. At the most detailed level, looking at specific products in specific countries, the researchers found that exporters saw little change in prices due to tariffs. That means the tariffs are fully passed on to the price paid at the U.S. border. Between February and December 2025, when tariffs rose by an average of 8 percentage points, import volumes fell by about 3.6%, but exporters did not lower prices to make goods more competitive.
So why are overall prices still falling?
While individual sellers did not lower their prices, the researchers found that broader product prices did fall as tariffs rose. This means American buyers are switching suppliers. Products facing larger tariff increases lead to more foreign sellers exiting the U.S. market, primarily those with higher prices, while new, cheaper sellers enter the U.S. market. The study found that about 65% of price drops come from this “entry and exit” effect, rather than existing sellers changing prices.
Why cheaper is not necessarily better
The most important and concerning part of the study is that the researchers suspect that some of these “cheaper” new sellers may not just be cheaper because they are more efficient. They may be cheaper because they offer lower quality goods.
To test this, they built a clever metric called “attractiveness,” which is basically a score that measures how much buyers value a specific seller’s version of a product, rather than just the price. Sellers with high “attractiveness” can charge higher fees and people will still buy from them (because of better quality, brand trust, reliability, etc.). They calculated this attractiveness score using data from before the tariffs (2023-2024), so it is not distorted by the tariffs themselves.
They found that a large portion of the price reduction disappeared once quality differences were taken into account. In the case of the 2025 tariffs, about half of the product price declines are related to a shift to less attractive, lower-quality suppliers rather than actual cost savings from more efficient sourcing.
Do tariffs really raise prices?
Tariffs do raise prices once quality is taken into account, and the study found that when import prices include tariffs and quality differences are properly accounted for, tariffs raise final prices, albeit by less than the full amount of the tariff itself.
Without taking quality into account, tariffs appear to do little to increase final prices, but the researchers say this finding is misleading once quality adjustments are applied.
So why is this important?
Researchers say this illustrates the hidden costs of tariffs: consumers may receive lower-quality inputs and goods, which may also hurt business productivity if companies are forced to use lower-quality imported materials in production.
To specifically check whether this was a fluke with the 2025 tariffs, the researchers conducted the exact same analysis on the 2018-19 U.S.-China trade war. They found the same pattern: Tariffs force buyers to switch to cheaper, lower-quality suppliers, and once quality is adjusted, the actual cost to consumers is higher than initially appeared.
