Tariffs are essentially taxes levied on imported goods, typically calculated as a percentage of the price a buyer pays to a foreign seller. In the United States, these duties are collected by Customs and Border Protection agents stationed at 328 ports of entry across the country. While rates vary depending on the product—for instance, passenger cars are generally taxed at 2.5%, while golf shoes face a 6% levy—they can be lower for nations with specific trade agreements. A notable example is the US-Mexico-Canada trade agreement, which allows most goods to move between these three countries tariff-free.
There is often confusion regarding who bears the financial burden of these taxes. While proponents like President Donald Trump have argued that foreign nations pay them, the reality is that American companies—the importers—pay the tariffs directly to the U.S. Treasury. These businesses frequently pass the added costs to consumers through higher retail prices, which is why most economists view tariffs as an inefficient tool for generating revenue or fostering prosperity.
Historically, tariffs were a primary source of federal funding, accounting for 90% of government revenue between 1790 and 1860, long before the establishment of the federal income tax in 1913. Today, their role is significantly diminished; in the fiscal year ending September 30, the government collected approximately $80 billion in tariffs and fees. This figure is minor compared to the $2.5 trillion generated by individual income taxes or the $1.7 trillion from Social Security and Medicare contributions.
Beyond revenue, tariffs are used to protect domestic industries and as leverage in international disputes. President Trump has frequently championed them, stating at a Flint, Michigan, rally that “Tariffs are the greatest thing ever invented.” His administration utilized them to target steel, aluminum, solar panels, and a wide range of Chinese imports. In 2019, he even leveraged the threat of tariffs to pressure Mexico into curbing the flow of Central American migrants toward the U.S. border. Trump has also suggested that tariffs could prevent military conflicts, claiming he would threaten 100% tariffs to deter foreign leaders, telling them, “Sir, we won’t go to war.”
Despite these objectives, research suggests that tariffs often fail to achieve their intended economic outcomes. A study by economists from Harvard, MIT, the University of Zurich, and the World Bank found that Trump’s previous tariffs did not increase or decrease U.S. employment in protected sectors. For example, despite 2018 taxes on imported steel, employment at American steel plants remained stagnant at roughly 140,000 jobs. For context, Walmart alone employs 1.6 million people in the United States.
Furthermore, retaliatory measures from other nations often exacerbate the damage. When the U.S. imposed steel and aluminum tariffs, the European Union responded by taxing American products like bourbon and Harley-Davidson motorcycles. Similarly, China targeted U.S. agricultural exports like pork and soybeans. While the U.S. government provided billions in aid to farmers to offset these losses, the retaliatory taxes still caused negative employment impacts. Research by Yang Zhou of Fudan University also noted that these trade wars inflicted significantly more damage on the Chinese economy than on the U.S. economy.
While the trade war may have struggled as a broad economic policy, it proved effective as a political strategy. The same multi-institutional study found that support for Trump and Republican congressional candidates increased in regions most affected by the tariffs, particularly in the industrial Midwest and manufacturing-heavy Southern states like North Carolina and Tennessee. As the U.S. continues to move away from its post-World War II commitment to free trade, these policies remain a central, if contentious, pillar of the current economic agenda. The report also notes that tariffs accounted for 90% of federal revenue, according to Douglas Irwin, a Dartmouth College economist who has studied the history of trade policy, from 1790 to 1860. The report also notes that still, Trump wants to enact a budget policy that resembles what was in place in the 19th century. The report also notes that wASHINGTON (AP) — Tariffs are in the news at the moment. The report also notes that here’s what they are and what you need to know about them. The report also notes that considering them a mostly inefficient way for governments to raise money and promote prosperity, mainstream economists are generally skeptical of tariffs. The report also notes that that’s why economists say consumers usually end up footing the bill for tariffs. The report also notes that manufacturing jobs, widely attributed to unfettered tree trade and an increasingly powerful China.
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