Pros and cons of tariffs

Donald Trump has urged Nato members to stop buying Russian oil and gas and introduce tariffs on China. In return, the US will impose “major sanctions” on Moscow.

The US president said he believed that Nato sanctions on Russia, “plus Nato, as a group, placing 50% to 100% tariffs on China, to be fully withdrawn after the war with Russia and Ukraine is ended, will also be of great help in ending this deadly, but ridiculous war”.

Trump has already placed an additional 25% import tax on goods from India as punishment for it buying Russian energy products. But he has yet to impose further tariffs on China for doing the same despite it being the largest buyer of Russian oil products. Turkey, Hungary and Slovakia, all Nato members, also purchase Russian oil and gas.

The Week

Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

SUBSCRIBE & SAVE

Sign up for The Week's Free Newsletters

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

Sign up

Since returning to the White House in January, Trump has used tariffs to reshape the global economy and draw key political concessions from allies and rivals alike – with decidedly mixed results. Here are the pros and cons of tariffs.

Pro: increases government revenue

Tariffs are essentially another form of tax and as such generate revenue for governments. A quick look at the data behind this claim “tells a compelling story”, said Sky News’ economics editor Ed Conway. Indeed, “for nearly all of the 19th century, tariffs imposed on goods imported into America provided more than half the government's revenues.”

Last month, Trump claimed US tariffs on foreign goods that came into effect in April have brought in “trillions of dollars”, although the latest Treasury Department data suggests the US collected just $142 billion from tariff revenue so far this fiscal year.

It means that, as a source of revenue relative to the size of today’s global economy, income from tariffs is “modest”, said the Council on Foreign Relations.

Con: impacts on consumers and economy

One of the “most immediate impacts of tariffs is a rise in consumer prices”, said EV Magazine. Studies by the National Bureau of Economic Research on Trump's first term suggest “most of the economic burden” of increased tariffs “was ultimately borne by US consumers”, BBC Verify said.

Significant short-term price hikes on imported goods, ranging from electronics and cars to everyday groceries, can in turn “contribute to inflationary pressure”, said EV Magazine, forcing central banks to “raise interest rates, potentially slowing economic growth and increasing borrowing costs for businesses and consumers”.

The problem, said Sky News’ Conway, is that “there is only so high one can lift these fees before they begin to stifle activity, making goods so expensive to import that domestic consumers face economic damage”.

Because tariffs are “in essence a tax on consumers”, Trump’s levies offer the “sort of liberation that most corporate bosses and investors would happily do without”, said The Economist.

Pro: protects domestic businesses and jobs

“In most cases” tariffs are “intended to protect local industries by making imports more expensive and driving consumers to domestic producers”, said the Council on Foreign Relations. Supporters argue that tariffs incentivise companies to manufacture goods within their own country, reviving industry while bolstering supply chain resilience.

“Long-standing concern” about the loss of manufacturing jobs to countries with lower labour costs has been a main driver for the anti-globalisation movement in the developed world, said the BBC. Trump has told American workers that they no longer need to be “worried” about losing their jobs to “foreign nations”. Instead, he said, “foreign nations will be worried about losing their jobs to America”.

Con: lobbying and corruption

Tariffs often lead to “cascading protectionism and create a fertile ground for corruption”, said the free-market think tank the Cato Institute. Trump’s 2018–19 tariffs on China led to “a complex process of exclusion requests” and “lobbying”.

In the absence of appropriate oversight, tariff exemptions “become political currency – traded between firms and officials in what amounts to a pay-to-play arrangement”, said Forbes. Rather than economic factors, decisions are determined by “lobbyists, campaign contributions, and political connections”.

Pro: protecting national interests

Trump “has long argued that the US is being cheated by its trading partners and that tariffs are the best remedy”, said The Guardian.

Politically, tariffs can be used as an “extension of foreign policy”, said Investopedia. Imposing them on a trading partner’s significant exports “may be used to exert economic leverage”.

The use of tariffs as a “negotiating tool” with other countries “might well be their main function in the hands of Mr Trump”, said Conway. In his first nine months back in office, he has used the threat of levies on Mexican and Canadian goods to try to force both governments to stop the flow of illegal immigrants and fentanyl into the US. Trump has successfully wielded the threat of tariffs to break a deadlock with Colombia over the return of deported migrants, and is now trying to force Russia’s hand in the Ukraine war by targeting India and China.

Con: retaliatory tariffs

Retaliatory – or tit for tat – tariffs are among the “multifaceted harms of protectionist measures”, said the Cato Institute.

A 2024 study by economists from international universities and the World Bank concluded that retaliatory levies imposed by China and other nations on US goods during Trump's first term had “negative employment impacts”, especially for farmers.

But “if Trump’s trade war fizzled as policy” it “succeeded as politics”, said NBC News. Support for Trump and Republican congressional candidates rose “in areas most exposed to the import tariffs, including the industrial Midwest and manufacturing-heavy Southern states like North Carolina and Tennessee”.