Donald Trump has made a big deal about his big beautiful tariffs. He is correct in saying they are generating money that is going into the US Treasury, but where is that money coming from? 

The companies that are receiving the goods into the US pay the tariffs even if the shipper discounts the price of their goods. They then have the option of absorbing the tariff cost or passing part or all of the cost on to their customers. That may be the end consumer, a retailer, a processer, or manufacturer.

If the importer feels they can’t absorb the cost of the tariff, they then have to determine the likelihood of if their customer will pay the increased price before they order from their overseas vendor. If the importer does bring the goods in and does increase the price, their customers have to determine if they are willing to pay the higher price. If not, they won’t import the item, or if they do, they may be stuck with items that consumers refuse to buy. Ultimately fewer goods may be available, or businesses may lose money.

So, let’s call it what it what it really is: A consumption or national sales tax. We the consumers pay it or the importer or others in the chain pay for it or suffer profit reduction. 

Tariffs have been used throughout history by many countries for many reasons. The US used tariff income to finance 80 to 95 percent of the federal government until 1861 when an income tax was enacted to finance the Civil War. This tax was repealed after the war and tariffs were again the principal source of government income until 1913, when the progressive income tax was finally enacted. The size of tariffs was lowered or eliminated at that time, but not all were. And they have varied in size and use on select items to this day.

Tariffs are used for several reasons. They can protect strategic things such as steel, aluminum, military items, and electronics. They are also used to try to gain some sort of negotiating leverage or to protect important developing industries. Sometimes they are used in an effort to influence other nations’ political decisions.

The current US administration seems to confuse trade imbalance in many cases with being taken advantage of and is using tariffs as a negotiating strategy as well as punitive measures. They are also trying to encourage investment in industries that had been exported over the past 40 years.

Even though hundreds of millions of dollars are flowing into the treasury today, that only accounts for about 1 ½ percent of the country’s total income and that may be offset by the reduction of goods imported. 

In any event, what has transpired these past seven months has upset global trade and confused and angered trading partners. I’m not sure where all this is going but I do know prices on many items are rising, not going down, and inflation is raising its ugly head. 

Ken Kaiyala
9-6-2025