Tariffs: What They Are, When They Help, and When They Hurt
By R.L. Crossan
When you hear the word tariff, it may sound like dry economic jargon — but tariffs have shaped everything from job markets to supermarket prices to international conflict. They're one of the oldest tools in economic policy, yet still one of the most debated.
So what exactly are tariffs? How do they affect everyday people? And when do they help—or hurt—the country imposing them?
Let’s unpack it.
📦 What Is a Tariff?
A tariff is a tax placed on imported goods. It raises the cost of those goods when they enter a country. The purpose? It depends on the moment:
To protect domestic industries from foreign competition
To raise government revenue
To leverage trade negotiations
Or sometimes, to retaliate in a trade dispute
For example, if the U.S. imposes a 25% tariff on imported steel, foreign steel becomes more expensive to U.S. companies. That gives U.S.-based steel producers a price advantage.
✅ When Tariffs Can Be Helpful
1. Protecting Emerging Industries Tariffs can give young or struggling domestic industries time to grow without being undercut by cheaper imports. This is called “infant industry protection.”
🧪 Example:
In the early 1800s, the U.S. used tariffs to protect its developing textile industry from dominant British imports.
2. National Security Certain industries—like defense, steel, or semiconductors—are considered too important to outsource. Tariffs can help ensure these sectors remain viable domestically.
3. Trade Leverage Tariffs can be a bargaining chip in trade negotiations. The threat of tariffs may bring other countries to the table to revise trade terms.
🧪 Example:
In 1981, the Reagan administration imposed tariffs on Japanese motorcycles to help Harley-Davidson. Within a few years, Harley recovered and asked for the tariffs to be removed early.
❌ When Tariffs Backfire
1. Higher Consumer Prices Tariffs raise the cost of imported goods—and companies often pass those costs onto consumers. That means everyday products like washing machines, cars, and electronics can get more expensive.
🧪 Example:
In 2018, when the U.S. imposed tariffs on Chinese goods and steel/aluminum imports, companies like Whirlpool raised appliance prices. A study found washing machines cost American consumers $86 more on average.
2. Retaliation from Other Countries Tariffs can provoke retaliation. If the U.S. imposes tariffs on China, China might respond with its own tariffs on U.S. agricultural goods, harming American farmers.
🧪 Example:
During the 2018–2019 U.S.–China trade war, China placed retaliatory tariffs on soybeans, causing U.S. exports to plunge and leading to billions in federal aid to farmers.
3. Disrupting Supply Chains Modern economies are globally interconnected. Tariffs on key parts can ripple through the economy, impacting not just imports, but domestic production too.
📉 How Tariffs Affect Inflation, Jobs, and the Stock Market
🔺 Inflation
Tariffs typically raise prices, which can contribute to inflation—especially when imposed on consumer goods or raw materials used in domestic manufacturing.
🧪 Case in Point:
A 2019 report by the Federal Reserve estimated the U.S.-China tariffs raised consumer prices, reduced income, and cost American households up to $800 per year on average.
👷♂️ Employment
Positive effect: Tariffs may temporarily protect jobs in vulnerable industries (like steel or furniture).
Negative effect: Other sectors may suffer job losses due to higher input costs, reduced exports, or foreign retaliation.
🧪 Example:
During the 2002 steel tariffs under President George W. Bush, about 3,500 steel jobs were temporarily preserved—but downstream industries (like auto and machinery) saw job losses estimated at over 200,000. The tariffs were repealed in under two years.
📉 Stock Market
Tariff announcements often cause market volatility, especially for industries exposed to global trade (tech, manufacturing, agriculture). Investors worry about higher costs, disrupted supply chains, and slower global growth.
🧪 Example:
In 2018–2019, markets dipped multiple times following tariff escalation between the U.S. and China, and rebounded with signs of negotiation.
🕰️ Historical Highlights (U.S.)
Smoot-Hawley Tariff (1930):
Meant to protect American farmers during the Great Depression, it sparked international retaliation and contributed to a deeper global economic crisis.Kennedy Round of GATT (1964–67):
A push to reduce tariffs and open global markets, leading to lower prices and expanded trade among Western nations.Trump Tariffs (2018–2020):
Imposed broadly on China, steel, aluminum, and more. Results were mixed: modest protection for some U.S. sectors, higher prices, trade retaliation, and increased federal subsidies to affected industries.
🔄 So Are Tariffs Good or Bad?
The real answer: it depends.
Tariffs are neither inherently evil nor universally helpful. They’re a blunt tool that can serve a strategic purpose — or create collateral damage.
The key is using them wisely:
As part of a broader economic or diplomatic strategy
With attention to long-term consequences
And with transparency for the people they affect
💭 A Reflective Take
If the goal is to protect American workers and strengthen the economy, we have to ask: Are tariffs helping us do that? Or are they fueling short-term wins and long-term pain?
The conversation deserves nuance, not slogans.
Like most things in policy and politics, the challenge isn’t choosing between “tariffs good” or “tariffs bad.” It’s about being honest about tradeoffs — and choosing tools that solve problems without creating bigger ones.