Tariffs: Economic Strategy or Political Gamble?

According to the U.S. President Donald Trump, the most beautiful word in the dictionary—more beautiful than 'love'—is 'tariffs.' But is it really?

Tariffs have long been a double-edged economic tool, capable of shaping economies, disrupting industries, and influencing global relations. While their intended purpose is to protect domestic industries, create jobs, and correct trade imbalances, their unintended consequences often extend far beyond these goals. Higher consumer prices, economic inefficiencies, and retaliatory trade measures from other nations frequently follow.

But have tariffs ever truly worked? Or are they just another political illusion, promising prosperity while placing the burden on consumers?

The Smoot-Hawley Tariff: A Historical Lesson in Failure

One of the earliest and most disastrous examples of protectionist policy was the Smoot-Hawley Tariff Act of 1930. Intended to shield American jobs and industries, it instead backfired catastrophically:

• U.S. imports dropped by 66%, crippling industries reliant on international trade.

• Over 30 countries retaliated, imposing tariffs of their own and isolating the U.S. economy.

• U.S. exports fell by 61%, worsening the Great Depression.

• Global trade collapsed, leading to mass unemployment and economic devastation.

The Smoot-Hawley Tariff didn’t just hurt America—it sent shockwaves through the global economy. Some historians argue that it played a role in Japan’s military expansion leading up to World War II. Their reasoning? If the U.S. could shut out trade at any moment, then Japan—a country heavily reliant on exports like raw silk—needed to secure its own economic and territorial security, leading to a push for expansionism in East Asia.

Do Tariffs Ever Work? The Exceptions

While most tariffs cause more harm than good, there are a few cases where they have successfully achieved their goals—but only when applied strategically.

Success Story: South Korea’s Auto Tariffs (1970s–1990s)

South Korea imposed high tariffs on Japanese automobiles to protect its developing car industry. The result? Hyundai, Kia, and other domestic brands grew into global competitors. The key factor? This was a temporary, well-structured policy, and the tariffs were lifted once the industry became competitive.

Failure: India’s Electronics Tariffs (2018–Present)

India attempted a similar strategy with high tariffs on smartphones, laptops, and electronic components under its "Make in India" initiative. The outcome?

• Consumer prices skyrocketed, making essential technology unaffordable.

• Foreign investment declined, discouraging tech companies from entering the Indian market.

• India’s digital transformation slowed, restricting access to modern technology.

Unlike South Korea’s focused, temporary tariffs, India’s broad and prolonged protectionist policies stifled innovation, proving that not all tariffs lead to success.

The Trump Tariffs: Who Really Pays the Price?

In 2018, the Trump administration imposed a 25% tariff on steel imports to boost domestic steel production. The result?

• China retaliated with tariffs on U.S. agricultural exports (such as soybeans, pork, and wheat), severely impacting American farmers.

• Manufacturing costs soared, particularly for industries reliant on imported raw materials.

• Consumer prices increased, making cars, appliances, and construction materials more expensive for Americans.

And the real cost of saving jobs?

A University of Chicago study estimated that for every U.S. steel job saved, consumers and businesses paid an additional $900,000 per year—a staggering cost for protectionism.

The Washing Machine Tariff: A $820,000 Per Job Policy

Another clear-cut example of tariff fallout was Trump’s 2018 tariffs on washing machines.

• Washer and dryer prices surged by 12% in just one year.

• Even dryers (which weren’t subject to tariffs) became more expensive because they were often sold as sets.

• LG and Samsung moved some production to the U.S., creating roughly 2,000 jobs.

• But the cost? Each job created cost consumers $820,000 in inflated prices.

So while tariffs protected a few industries, they ultimately harmed many others and burdened American consumers far more than they helped.

Tariffs as a Political Weapon

Beyond their economic impact, tariffs are also a powerful political tool.

• They serve specific industries—often small but well-organized groups with strong lobbying power.

• Consumers—the larger but less organized group—end up paying the price.

• Tariffs can be leveraged in trade negotiations, often remaining in place long after their intended purpose has been fulfilled.

Example: Trump’s Tariffs on China (2018–Present)

In 2018, President Trump imposed tariffs on China, citing trade imbalances and intellectual property theft. However, when Biden took office, he didn’t remove them. Why? Because tariffs had become a strategic bargaining chip, making them as much about geopolitics as economics.

The Fentanyl Crisis and Tariff Politics

Tariffs are often used as justifications for policy decisions, shaping public perception rather than solving the actual problem. A prime example? Trump’s justification for tariffs on Mexico and Canada.

In addition to addressing trade imbalances, protecting American jobs, and incentivizing businesses to move back to the U.S., Trump argued that tariffs would reduce fentanyl smuggling and save American lives from opioid overdoses.

While strict border security may help reduce some smuggling, Canada’s role in fentanyl trafficking is minimal. And in reality, Trump’s tariffs have little to do with the decline in fentanyl-related deaths.

What’s Actually Saving Lives? Narcan.

• Narcan (naloxone) is a medication that reverses opioid overdoses.

• Though it has been available for decades, in 2023, the FDA approved it for over-the-counter sales, making it widely accessible.

• Since then, opioid overdose deaths have declined significantly. Provisional data indicate that from October 2023 to September 2024, overdose deaths dropped nearly 24%, from 114,000 to 87,000 deaths nationwide.

What’s Really Happening?

• Greater access to Narcan has reduced fatal overdoses.

• Drug users are switching to other substances—which may be less immediately lethal but still dangerous.

But when politicians want to claim success, they won’t focus on harm reduction or addiction recovery—they’ll cite death rate declines as proof of policy success, whether or not their policies had a significant impact. So, at some point, President Trump could declare victory over opioid-related deaths and use that as a justification to scale back most tariffs on Canada and Mexico. That would be the best-case scenario—a strategic retreat framed as a policy success.

The True Cost of Tariffs

• Tariffs raise inflation, drive up costs for businesses, and can trigger a recession.

• The real winners are politicians and special interest groups—not the average consumer.

So, next time you hear a politician promise that tariffs will “bring jobs back” or “make the economy great”, ask yourself—at what cost?

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