Protectionist policies sacrifice efficiency for the sake of political gain. Rather than increasing productivity, tariffs merely redistribute resources toward producers in the protected industry and the government.
Recently, Secretary of the Treasury Scott Bessent boasted that tariff revenues exceeded $31 billion in August. Furthermore, the Tax Foundation predicts that President Trump’s tariffs will raise $2.3 trillion over the next 10 years and decrease U.S. GDP by 0.8%. The White House would have Americans believe that foreign businesses bear most of the burden imposed by tariffs; however, robust economic analysis reveals the detrimental consequences of tariffs for American companies and consumers.
A Dallas Federal Reserve survey (in August) noted that 47.7% of responding businesses reported adverse effects from tariffs. Worse still, 70% of responding manufacturing firms were harmed. Most businesses cited higher input costs, higher selling prices, and slower delivery times from suppliers. Increasing prices of wholesale goods were reflected in the producer price index, which spiked alarmingly in July. Initially, economists predicted a 0.2% PPI increase, but the Bureau of Labor Statistics reported a 0.9% increase that month, the greatest since 2022.
As producers’ prices skyrocket, economists expect consumers’ prices to follow suit. Increased production costs force businesses to increase their prices or to face diminishing profit margins. The Dallas Federal Reserve survey found that 80% of respondents had or planned to transfer cost increases to consumers.
An analysis by the Anderson Economic Group, reported in The Wall Street Journal, demonstrates the effects of Trump’s tariffs on automakers. In March, a 25% tariff was imposed on auto products from Mexico and Canada, and the percentage of cars affected by tariffs increased from about 10% to 80%. As a result, U.S. companies that depend on North American supply chains face increased costs and uncertainty. Despite attempts by firms to change suppliers and prevent cost increases, tariffs force firms and consumers to pay higher prices.
Apart from manufacturing concerns, the broad nature of the tariffs means that consumers face price increases across various industries.
As firms’ stockpiles run out — and they are forced to rely exclusively on new, imported inventory — consumers will begin to feel the effects of protectionist policies in the form of increasing prices and limited choices in goods. Economists at the Yale Budget Lab expect prices to grow by 1.8% in the short run, which amounts to a loss of $2,400 per household.
Prudent policymakers should recognize that the benefits tariffs offer to the tiny minority are overshadowed by the crippling costs they impose on the vast majority of Americans.
Lillian Kriese is a research associate at the Taxpayers Protection Alliance/InsideSources
