Tariffs this and tariffs that—it seems everywhere you look in the news today, everyone is talking about tariffs in one form or another. You’ve got a bunch of people talking about how tariffs will be the downfall of the American economy and the global economy as a result, and then there are others who seem to be pointing out the strategic benefits of various administrations’ stance on tariffs. However, tariffs are not a new phenomenon and have a pretty rich history within the US.
The Tariff Act of 1789 was the second bill signed by President George Washington, imposing a tariff of about 5% on nearly all imports. Since the enactment of this act, tariffs have been used by just about every US president since. In fact, as recently as the administrations of George W. Bush and Barack Obama, the US imposed quotas and tariffs on Chinese textiles in order to shield US domestic producers, accusing China of exporting these products at dumping prices.
Essentially, all tariffs do is discourage the consumers of a country from purchasing goods from outside its borders, making it so that producers and manufacturers of that country cannot be undercut by cheaper goods coming from outside its borders. This simple mechanism has profound economic implications, both positive and negative, depending on one’s perspective and economic interests.
Not only do tariffs promote production within a specific country, but in the case of the US, with a plethora of labor laws across every industry, they ensure that the goods you purchase are ethically manufactured and not handed off to child laborers in countries where labor law is weaker or even non-existent. This ethical dimension adds another layer to the debate about tariffs beyond pure economic considerations.
Tariffs not being new and having been used by almost every president prior to Donald Trump, it seems odd that the use of tariffs under the Trump administration caused such widespread controversy. Why might that be? Let’s get into it.
Why is Trump being scrutinised for his position on tariffs?
Why is it that Trump seems to be under so much fire for his policies surrounding tariffs? As we have already discussed above, tariffs have been a useful tool for almost every US president and other governments worldwide. So why is Trump’s stance garnering such widespread criticism assuming he isn’t doing too much different to his forebears?
One theory might just be that Trump can do nothing right in the eyes of half of the American population who did not vote for him in the presidential election, and although this might be somewhat accurate, there is legitimate concern for the economic, social, and political effects that imposing tariffs on other countries could have.
Economic Effects
Imposing tariffs on countries like China, Mexico, Canada, Japan, and Germany (the US’s 5 main importers) would achieve the goal of protecting American manufacturers and producers. However, the dark side of these tariffs, which is legitimate cause for concern, is that stopping the import of cheaper goods from other countries invariably raises the overall costs of goods that are produced and circulating throughout the US.
Cutting off the flow of these cheaper products has the potential to cause hyperinflation and seriously hinder the country’s economic performance. When prices rise across broad categories of consumer goods, American households feel the pinch immediately. For example, tariffs on steel and aluminum increase costs for American manufacturers of everything from automobiles to appliances, costs which are then passed on to consumers.
Additionally, tariffs can disrupt global supply chains that have become increasingly integrated over decades. Many American companies rely on imported components to create their final products. When these components become more expensive due to tariffs, businesses face difficult choices: absorb the higher costs (reducing profits), pass costs to consumers (reducing sales), or cut other expenses (often jobs).
Perhaps most concerning is the risk of retaliatory tariffs. When the US imposes tariffs on foreign goods, affected countries typically respond in kind. This tit-for-tat escalation can harm American exporters, particularly in sectors like agriculture, where American farmers rely heavily on foreign markets. The resulting trade wars can lead to economic slowdowns on both sides and potentially contribute to global economic instability.
Political Effects
Tariffs put significant strain on diplomatic relationships between the US and its trading partners. These economic policies don’t exist in a vacuum—they create political tensions that can spill over into other areas of international cooperation.
When the US imposes substantial tariffs, particularly on allies like Canada, Mexico, and European nations, it risks eroding trust built over decades of partnership. These countries may become less willing to collaborate on other matters of mutual interest, such as security alliances, intelligence sharing, or coordinated efforts on global challenges like climate change.
Tariffs can also reshape geopolitical alignments. As the US pulls back from free trade arrangements, it creates opportunities for other powers—particularly China—to establish their own trading spheres of influence. Many countries affected by US tariffs may seek to strengthen economic ties with other major economies, potentially weakening America’s global influence in the long term.
Furthermore, tariffs can complicate or derail ongoing diplomatic initiatives. Trade negotiations become more difficult when conducted in an atmosphere of economic confrontation rather than cooperation, making it harder to reach agreements on other issues of international importance.
Social Effects
The social impact of tariffs on American people is complex and often uneven across different communities. While some manufacturing towns may see job growth when protected from foreign competition, consumers nationwide typically face higher prices for everyday goods.
Working-class families often feel the greatest impact from tariff-induced price increases, as they spend a larger percentage of their income on consumer goods. Higher prices for necessities like washing machines, electronics, and even food items can significantly strain household budgets already under pressure.
Additionally, the uncertainty created by shifting trade policies can cause economic anxiety. Businesses hesitate to invest or expand when they can’t predict future costs or market access, potentially limiting job creation. Workers in export-dependent industries face particular stress when retaliatory tariffs threaten their livelihoods.
Communities dependent on global trade—from port cities to farming regions that export crops—can experience profound disruption when tariff wars escalate. The resulting economic hardship can contribute to social problems including increased income inequality, community instability, and heightened political polarisation as citizens debate the merits of protectionist versus free trade policies.
The positive side of tariffs
Americans need to realize the power their money has. They are the biggest market of consumers in the world, and the way they spend their money has real consequences. When American consumers prioritize cheaper imported goods without consideration for their origin, they unwittingly support manufacturing systems that may not align with American values or interests. Tariffs can help redirect this immense purchasing power toward domestic production.
America also needs to focus on putting its needs first. The United States cannot be the global peacekeeper giving handouts to every country left and right. Just because things are good in America now does not mean they will stay that way forever, especially if the nation fails to focus on its own needs first. Tariffs represent a policy tool that places American economic interests at the forefront of trade decisions.
It is also worth noting that importing products from China, the Congo, and other countries that fail to prioritize labor laws and workers’ health and safety supports a much larger issue. When Americans purchase goods manufactured under questionable labor conditions, they indirectly support systems that may exploit workers, ignore environmental regulations, and undermine the very standards that American workers fought for decades to establish.
Keeping manufacturing jobs in America may mean consumers pay slightly more for goods, but the overall impact on the economy will be able to sustain the rising cost of goods. More Americans employed in manufacturing means more people with stable incomes who can afford to purchase goods and services, creating a virtuous economic cycle. These workers pay taxes, reduce dependency on government assistance programs, and contribute to their local economies.
Take Apple, for example, which has discussed moving some manufacturing operations back to America partly in response to tariff pressures. According to a 2021 study by the Economic Policy Institute, if Apple were to shift just 10% of its production to the United States, it could create approximately 50,000 direct manufacturing jobs. When accounting for supplier networks and indirect employment effects, the total impact could reach over 150,000 jobs. These positions would generate an estimated $8-12 billion in annual wages that would circulate throughout the American economy.
While tariffs are not without drawbacks, as discussed in previous sections, they represent a legitimate policy tool with significant potential benefits when strategically applied. The debate should focus not on whether tariffs should be used at all, but rather on how they can be implemented most effectively to serve America’s economic interests while minimizing negative consequences.
