A Progressive Explainer on Tariffs International trade is not inherently good or bad — it is a means to achieve an end. Ideally, if the rules are designed appropriately, that end is a prosperous society where people work with dignity and enjoy a healthy environment. In the same way, tariffs are not inherently good or bad. They are a tool that can be used to achieve various objectives. When used strategically, tariffs are an important tool for protecting American jobs and industries from unfair competition. But tariffs alone do not build new production capacity or ensure Americans have reliable access to goods. Revitalizing U.S. manufacturing and creating good-paying jobs requires combining tariffs with tax, investment, procurement and other industrial policy tools. Trump’s reckless tariff plan will do more harm than good.
What is a tariff? A tariff is a tax on an imported product. The importer of the good pays the tariff, not foreign countries or foreign companies, as Trump suggests. The importer can either choose to absorb the cost of the tariff or pass it along to the consumer. The tariff applies to the wholesale price that the importer pays, not what the consumer pays. Tariffs have long been used by governments to support infant industries and help spur economic development. A neoliberal orthodoxy that became dominant under Ronald Reagan, however, created the trade policies of the last 40 years, which pushed for “free trade” at all costs. Both main political parties embraced this philosophy, which has enabled corporations to offshore production to low-wage countries knowing that they would face low tariffs when they imported those goods back for sale here. Senator Bernie Sanders speaking in 2019.