The market has long harbored a fantasy: high tariffs will force foreign exporters to bleed and lower prices, thereby protecting the U.S. domestic economy. However, China Securities Construction (CSC) points out: In this tariff game, the ones footing the bill are U.S. importers, and ultimately, U.S. consumers.
On February 25, China Securities Construction (CSC) released a research report indicating that the &#34;pass-through rate&#34; of tariffs in 2025 is as high as 92%. This means that foreign exporters have almost no incentive to lower prices, and for every $100 increase in tariff costs, U.S. importers have to bear $92. More critically, as inventory depletes, this cost pressure is spreading to the Personal Consumption Expenditures (PCE) index at an astonishing rate. By December 2025, tariffs are expected to cumulatively push PCE up by approximately 0.72 percentage points year-on-year, raising the actual PCE to 2.90% (compared to 2.18% without tariffs).
Macroeconomic Impact on Investors:
<blockquote>
<ol>
<li>Inflation stickiness is severely underestimated: The additional 0.72 percentage points of inflation brought by tariffs means that the inflation baseline faced by the Federal Reserve is more stubborn than expected, and the market's pricing of interest rate cuts may be overly optimistic.</li>
<li>Corporate profit margins are under pressure: In high pass-through rate industries (such as toys, furniture, and clothing), U.S. importers have initially borne huge costs. If they cannot fully pass on this additional inflation of over 65% to end consumers, the profit expectations of related retailers and importers will be significantly downgraded.</li>
<li>Seeking safe havens with &#34;domestic alternative capacity&#34;: Only in industries with substantial domestic production capacity in the U.S., such as crop production and basic chemicals, will foreign exporters be forced to lower prices to absorb tariffs. This means that in trade frictions, U.S. domestic defensive sectors with high substitutability have greater certainty.</li>
</ol>
</blockquote>
<h2>First Level Transmission: Exporters Refuse to Lower Prices, U.S. Importers Absorb 92% of Tariff Costs</h2>
The first part of the report hits the core: who ultimately bears the tariff costs? China Securities Construction based on HS10 level import data has constructed a large panel dataset containing 5.35 million observations (covering 8 countries, 20,868 products, spanning 108 months to December 2025).
The baseline conclusion from the regression model is: β≈−0.08, meaning the pass-through rate is approximately 92%. For every 1 percentage point increase in tariffs, exporters only reduce prices by an average of 0.08 percentage points. Exporters only absorb 8% of the impact, while the remaining 92% falls entirely on U.S. buyers.
Looking at the data by country, the findings are even more striking:
<blockquote>
<ul>
<li>China: The pass-through rate is as high as 94%. For every $100 in tariffs, U.S. importers bear $94, while Chinese exporters only absorb $6.</li>
<li>Japan and ASEAN: The pass-through rate exceeds 100% (Japan 1.12, ASEAN 1.19). This means that exporters from these regions not only did not lower prices but instead raised prices taking advantage of the tariff barriers to expand profits</li>
</ul>
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/18a70a71-710e-4bfb-8d8a-4f7b0fde1f25.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/18a70a71-710e-4bfb-8d8a-4f7b0fde1f25.png"/>
</blockquote>
<h2>Industry Polarization: Who is Taking Advantage of the Fire, and Who is Cutting Losses to Preserve Value?</h2>
The research report further analyzed 44 NAICS industry codes (covering 83% of import volume) and found that the average trend transmission rate reached 83%, with a median as high as 97%.
<blockquote>
<ul>
<li>High transmission rate industries (U.S. companies fully taking over): Metalworking machinery (134%), toys (105%), furniture (105%), clothing (104%), agricultural machinery (111%). The report specifically pointed out that 80% of toys in the U.S. come from China, and 70% of automotive seats and interiors are manufactured in Mexico. The transmission rates for these two highly concentrated industries are close to or exceed 100%, as importers simply cannot find alternatives.</li>
<li>Low transmission rate industries (exporters bleeding and lowering prices): Crop production, communication equipment manufacturing, basic chemical manufacturing, etc. Why are exporters in these industries willing to absorb tariffs? The report bluntly states: domestic production capacity. Crops and basic chemicals are industries where U.S. exports exceed imports, with significant domestic alternative production capacity. Foreign exporters face extremely high demand elasticity; if they do not lower prices, they will be completely abandoned by the market.</li>
</ul>
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/731d3f68-40e7-431f-8126-c2d1b2f60b4b.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/731d3f68-40e7-431f-8126-c2d1b2f60b4b.png"/>
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<h2>Second Layer Transmission: The Explosion After the Delay, Inflation Bills Submitted to U.S. Consumers</h2>
Where did the costs borne by importers ultimately go? The report tracked the penetration of tariffs on PCE (Personal Consumption Expenditures) inflation through a five-step transmission model.
The data reveals a dangerous &#34;delay trap&#34;:
<blockquote>
<ul>
<li>The initial stage of boiling frogs: Within 2-3 months after the tariffs took effect, the impact is almost invisible (the transmission coefficient ββ is only between 0.02-0.08 and is not significant). During this period, U.S. companies are consuming old inventory.</li>
<li>Rapid rebound after inventory depletion: Starting from June-July, as low-cost inventory is exhausted, the transmission coefficient rises sharply, statistically significant for the first time at the 1% level in July, soaring to 0.55 in September, and finally reaching 0.65 in December.</li>
<li>The final form of the inflation bill: β=0.65β=0.65 means that theoretically, of the 1% price increase that tariffs should push up, 0.65% has already been converted into consumers' &#34;excess inflation.&#34;</li>
</ul>
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/c78cefbc-6943-4d5a-a36a-500ecfd6a270.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/c78cefbc-6943-4d5a-a36a-500ecfd6a270.png"/>
</blockquote>
The final macro account shows: As of December 2025, tariffs will cumulatively push PCE year-on-year by approximately 0.72 percentage points. The actual PCE year-on-year in December reached 2.90%. If we forcibly deduct the tariff-driven effect, the real PCE is actually only 2.18% (very close to the Federal Reserve's 2% target)
The impact of tariffs on inflation has worsened month by month, increasing from a mere +0.06pp in April to +0.72pp by the end of the year.
Risk Warning and Disclaimer
The market carries risks, and investments should be made with caution. This article does not constitute personal investment advice and does not take into account the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article align with their specific circumstances. Investment based on this is at one's own risk

FNCL

CITIC Construction Investment (CSC) released a research report indicating that the costs of high tariffs in the United States are primarily borne by American importers and consumers. It is expected that by 2025, tariffs will push up the Personal Consumption Expenditures (PCE) price index by approximately 0.72 percentage points, resulting in an actual PCE of 2.90%. This suggests that the inflation pressure faced by the Federal Reserve may be underestimated, and corporate profit margins will also be squeezed. Only in industries with strong domestic production capacity in the United States will foreign exporters be forced to lower prices

- High tariffs have not forced foreign exporters to lower prices, as American importers absorb 92% of the costs, impacting consumers significantly.  
- A study by CSC reveals that by December 2025, tariffs are projected to raise the Personal Consumption Expenditures (PCE) index by approximately 0.72 percentage points, leading to an actual PCE of 2.90%.  
- The research indicates sectors like toys and furniture face high tariff transmission rates, suggesting consumer prices are likely to increase unless retailers can pass on these costs completely.

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