The Cost of Control: Tariffs in Focus
By J. Simpson
Editor’s note: The opinions expressed here are those of the authors. View more opinion on ScoonTV
Tariffs have been dominating the headlines and news cycles since Donald Trump took to the campaign trail in 2024, leading up to his re-election. It’s only ramped up since President Trump has taken office, with the current administration remaining laser-focused on trade practices and economic policies.
What is less clear is why the Trump Administration has been so fixated on tariffs. It may be a remnant of his fixation on “trade deficits” that he’s talked about since the late ’80s. It also may be just another way to enrich himself and his friends and allies. It’s hard to say without properly understanding what tariffs are and how they work.
What Are Tariffs?
Tariffs are taxes or duties imposed by a government on imported and, sometimes, exported goods. They’re generally determined by either charging a fixed percentage of an item’s total worth or a fixed fee per unit. The general principle of a tariff is to make goods produced in foreign countries more expensive than their domestic counterparts. They can also serve as an important source of tax revenue.
Tariffs don’t have to be restricted to physical goods, either. They can also be imposed on services, either directly or through heightened licensed or regulatory requirements.
Reasons for Tariffs
The reasons governments adopt tariffs tend to be ideological as often as practical. At the root, governments impose tariffs to prioritize domestic business over foreign interests. In a globalized economy, it’s far too easy to export the products of cheap goods and resources to developing nations with a lower cost of living. While this may be good for developing economies in the short term, it can still disadvantage them in the long run due to environmental damage or the cost of exporting their goods, talents, and resources.
Tariffs can sometimes be employed to help give new industries a chance to develop, as well. They may not yet be robust or developed enough to compete internationally, so imposing tariffs can help buy emerging industries some time while they’re still getting established.
By and large, tariffs are an outgrowth of economic isolationism, designed to promote self-sufficiency and to curb the reliance on foreign goods. They can also be used as weapons or instruments of punishment, victimizing adversarial countries to force them into compliance.
Do Tariffs Work?
It’s not easy to answer whether or not tariffs actually work. On paper, tariffs protect domestic businesses, preserve jobs, and nurture emerging industries. The reality is a far more complicated matter. Tariffs often result in higher prices for consumers, reduced competition, and reciprocal tariffs from trading partners.
Economists argue that tariffs may result in short-term gains, but they rarely result in long-term competitiveness. The industries they seek to protect often fail to become competitive, and the developing nations end up falling irrevocably behind. That doesn’t mean there are never any occasions where tariffs might work.
Tariff Success Stories
Tariffs are not always a net negative. Tariffs were a major part of America’s fiscal policy for nearly 150 years. From the early 1800s to just after World War II, the United States maintained exorbitantly high tariffs, climbing as high as 44% in the period after the Civil War. This policy, although not universally successful, allowed the American steel and textile industries to flourish.
Tariffs played an important part in Japan’s rehabilitation following World War II, as well. During the ’50s and ’60s, Japan used a combination of high tariffs, targeted investment, and trade protection to help rebuild its steel and shipbuilding industries. This insularity allowed Japan to become one of the leading electronic producers in the world. South Korea followed a similar pattern. In the 1960s, South Korea used a combination of tariffs and import controls to promote its burgeoning steel, shipbuilding, chemical, and automotive industries. Although possibly less ethical, South Korea used quotas and productivity goals to exercise “tariff protections,” giving preference to certain businesses while penalizing others. By emphasizing education during this same period, South Korea was able to become a major world economy by the 1980s.
Tariff Failures
While tariffs have worked for some countries, more have experienced negative repercussions. The Smoot-Hawley Tariff Act remains one of the best examples of when tariffs go wrong. Designed to protect American farmers and manufacturers during the Great Depression, the act triggered a wave of retaliatory tariffs. International trade collapsed by more than 60 percent, deepening the global economic downturn and contributing to the rise of political extremism in Europe.
The tariffs imposed during the last Trump administration caused extensive economic damage, almost all of which was felt by consumers. According to the Journal of Economic Perspectives, “the United States experienced substantial increases in the prices of intermediates and final goods, dramatic changes to its supply-chain network, reductions in availability of imported varieties, and the complete pass-through of the tariffs into domestic prices of imported goods. Therefore, the full incidence of the tariffs has fallen on domestic consumers and importers so far, and our estimates imply a reduction in aggregate US real income of $1.4 billion per month by the end of 2018.”
Tariffs haven’t proved to be as effective at protecting developing economies, either. Instead of becoming robust and competitive, they become inefficient and uncompetitive. Brazil’s tariffs on digital products, in a misguided attempt to force Brazil to become a tech giant, are an example. Instead of creating a tech industry, Brazil lags far behind in technological adoption. By 2020, Brazil was 44th out of 79 countries in terms of digital connectivity. This is directly due to tariffs, which drive up the cost of electronics in Brazil, making them prohibitively expensive for many people.
Impact of Tariffs in 2025
Tariffs have been one of the biggest talking points of the current Trump administration. He made tariffs one of the central supports of his presidential campaign, promising to impose a 60% tariff on China, 100% on Mexico, and 20% on all other countries. He even floated the idea of replacing the Federal income tax with tariffs on the Joe Rogan podcast.
It’s unclear how much President Trump actually believes in tariffs and how much is simply pandering to his base or trying to enrich himself and his supporters. It becomes even less clear when you look at a timeline of President Trump’s tariff policies. Since taking office, President Trump has backpedaled on virtually every tariff he campaigned on, including China, which seemed to be the main target of the proposed tariffs. There is a whiplash effect that confuses Americans and global trade partners. Tariffs are put in place, then rolled back. American trade policy feels chaotic, capricious, and unstable.
It’s not immediately obvious if dropping the tariffs is due to the government’s behavior in a way President Trump wants or if he’s simply listening to economic advisors. Many economic analysts suggest that the tariffs would be a financial disaster. Penn Wharton’s Budget Model anticipates the tariffs resulting in a 6% reduction in the US GDP while causing a wage decrease of approximately 5%. Yale predict that the tariffs could reduce the US GDP by 1.1% while increasing consumer prices by 2.9%.
The tariffs are promising to have a sizable impact on the global economy, as well. The UN predicts that the tariffs imposed by President Trump could result in a .4% reduction of the global economy for at least the next two years, as well. It should be interesting to see how these economic policies play out, especially considering their uneven rollout.
Final Thoughts on Tariffs
As we have seen, there are times when tariffs are called for. They can help a burgeoning industry get off the ground. They can help developing nations grow into self-sustaining economies. Tariffs were even a major part of why the United States became such a major economic superpower in the first place.
For tariffs to be successful, they need to be implemented carefully. As we saw in the examples of Japan and South Korea, tariffs work well when they’re paired with an investment in education and infrastructure. Otherwise, the result could be like Brazil’s computer industry, putting the country years behind in the process.
If the Trump Administration is serious about imposing tariffs for the reasons they’ve cited, they should be incentivizing domestic manufacturing and encouraging education if they hope to restore the country to the economic superpower of former decades.
Curtis Scoon is the founder of ScoonTv.com Download the ScoonTv App to join our weekly livestream every Tuesday @ 8pm EST!