Tariffs: Winners, Losers, and the Ripple Effects

The Dive

Tariffs are more than just a tax on imports; they are a lever of economic influence, a tool of protectionism, and a political bargaining chip. At their core, tariffs are designed to protect domestic industries by making foreign goods more expensive. The goal? Encourage local production and reduce reliance on imports. But as with most economic policies, reality is more complicated—because someone, somewhere, always pays the price.

And more often than not, that ‘someone’ is the consumer.

Consider the energy sector. The U.S. has debated imposing tariffs on rare-earth minerals, which are essential for manufacturing wind turbines, solar panels, and electric vehicles. China dominates this market, and tariffs could theoretically boost U.S. mining operations. But there’s a catch—mining rare-earth elements is expensive and environmentally destructive. Domestic production would drive up costs, making clean energy technologies more expensive, slowing adoption, and raising the cost of living for the average American. In this case, tariffs don’t just shift trade dynamics; they shape the future of energy affordability.

During the COVID-19 pandemic, the fragility of global supply chains became painfully clear—especially for essential medical supplies like syringes, IV bags, and protective equipment. When countries closed their borders and prioritized their own populations, the U.S. found itself heavily reliant on foreign manufacturers for life-saving products. Tariffs on medical supplies could, in theory, encourage domestic production. But what happens when those costs are passed down to hospitals, insurers, and ultimately, patients? A higher price tag on basic medical necessities isn’t just an economic issue—it’s a public health crisis waiting to happen.

A common misconception about tariffs is that they directly cause price increases. While they do make imports more expensive, companies—especially those with strong market control—often take the opportunity to raise prices even higher than necessary. Take Apple as an example. If the U.S. places a 10% tariff on Chinese-manufactured iPhones, the added cost per phone might be $35. Apple, which has high profit margins, could handle this in a few ways: 1) Absorb the cost and take a small hit to profits (unlikely). 2) Pass the exact $35 increase onto consumers (expected). 3) Use the tariff as a cover to hike prices by $50 or more, actually increasing profits while blaming the tariff (most likely).

This isn’t just speculation—it’s exactly what happened with tariffs on washing machines. Prices didn’t just go up for washers; they went up for dryers too, even though dryers weren’t subject to tariffs. Companies saw an opportunity to inflate profits while consumers assumed tariffs were the culprit. This is how market power works. Tariffs don’t always make things more expensive—corporations do.

Tariffs rarely exist in isolation. When one country imposes tariffs, others often retaliate—and the effects ripple across industries. Nowhere is this more evident than in U.S.-Canada trade relations. The trillion-dollar auto industry is one of the most vulnerable sectors, as nearly a quarter of North America’s automotive production moves between Detroit and Windsor, Ontario. Thousands of jobs depend on cross-border trade, and tariffs can create significant disruptions.

Trade wars don’t just affect businesses; they create economic uncertainty that impacts everything from gas prices to grocery bills. A single tariff can lead to retaliatory measures on unrelated products, increasing costs for consumers and manufacturers alike. For example, past tariffs on steel and aluminum resulted in counter-tariffs on U.S. whiskey, dairy, and agricultural products, affecting American farmers and manufacturers with little to show for it in terms of job creation.

So, do tariffs work? The answer depends on what you consider a ‘win.’ They can benefit domestic manufacturers in certain industries, generate additional revenue for the government, and serve as a strategic tool in global trade negotiations. However, they also have significant drawbacks. Consumers often bear the brunt of higher prices, industries reliant on imported components—such as technology, automotive, and healthcare—face increased costs, and international trade relationships become more volatile, leading to economic uncertainty and potential retaliatory measures from other countries.

While protecting domestic industry is a legitimate goal, aggressive tariff policies can create economic instability and ultimately hurt consumers more than corporations. The real challenge for policymakers, businesses, and critical thinkers isn’t just debating whether tariffs are good or bad—it’s questioning who benefits, who pays the price, and whether tariffs are a genuine economic strategy or simply political theater. In an interconnected global economy, tariffs are more than just taxes on imports; they are tools of power, negotiation, and influence. Understanding their impact requires examining the bigger picture—how economies are shaped, who holds power, and how trade policies affect everyday lives.

Why It Matters

Tariffs aren’t just taxes on imports—they shape economies, influence global relationships, and determine which industries rise or fall. These policies have ripple effects that impact jobs, consumer prices, and the stability of international trade. Understanding tariffs means recognizing the delicate balance between protecting domestic industries and maintaining global cooperation. By exploring how tariffs work, we gain deeper insight into economic policy, trade decisions, and the power dynamics that shape everyday life.