Tariffs: A Buzzword, Explained

What tariffs are, who actually pays them, and what happens when presidents use them as a weapon.

"Tariff" is one of those words that gets thrown around on cable news like everyone already knows what it means. They don't. Here's the plain-English version: what tariffs are, who actually pays for them, how they've shaped American history, and why they've become one of the biggest economic stories of the decade.

What Is a Tariff?

A tariff is a tax on imported goods. When a product—steel, electronics, clothing, cars—enters the United States from another country, the company importing it pays a tax to U.S. Customs and Border Protection.

Who pays?

This is the single most misunderstood part. The foreign country does not write a check. The U.S. company that imports the goods pays the tariff. They then pass most of that cost forward—to manufacturers who buy their materials, to retailers, and ultimately to you, the consumer, through higher prices.

Research from the New York Federal Reserve and the Tax Policy Center found that the cost breaks down roughly like this:

~67%

paid by consumers through higher prices

~25%

absorbed by foreign exporters who lower prices to stay competitive

~8%

absorbed by U.S. importers who accept thinner margins

Tariffs are also regressive—they hit lower-income households harder. Why? Because buying things (food, clothing, appliances) takes up a bigger share of income for families earning less. A 25% tariff on imported clothing means the same price increase for everyone, but it stings more when you're living paycheck to paycheck.

How tariffs ripple through the economy

Imagine a 25% tariff on imported steel. The U.S. steel importer pays the tax and raises prices. Now every company that uses steel—car manufacturers, construction firms, appliance makers—faces higher costs. They raise their prices too. And here's the part that surprises people: even domestic steel producers raise their prices, because with foreign steel now more expensive, they can charge more and still be competitive. So the tariff raises prices across the board—imports and domestic products.

A Quick Primer: Imports, Exports, and Trade

Before we get into the history, a few basics. Countries trade with each other because no single country can efficiently produce everything its people need. The U.S. is a major exporter of agricultural products, aircraft, technology, and services. It's a major importer of consumer electronics, automobiles, oil, and manufactured goods.

~$3.2T

U.S. exports in 2024

~$4.1T

U.S. imports in 2024

What About the Trade Deficit?

You'll hear politicians talk about the trade deficit—the gap between what the U.S. imports and exports. In 2024, the deficit was over $900 billion. That sounds alarming, but economists see it with more nuance:

A trade deficit is not like being in debt—it doesn't mean the country is "losing money."
It often reflects that American consumers have strong purchasing power and high demand.
The U.S. has run trade deficits almost continuously since the 1970s while remaining the world's largest economy.
Deficits with specific countries can be misleading. An iPhone assembled in China contains parts from Japan, South Korea, Germany, and dozens of other countries. The "trade deficit with China" overstates the value China actually adds.

Why supply chains matter

Modern products rarely come from one country. A car might have steel from Brazil, electronics from Taiwan, rubber from Thailand, and final assembly in Mexico. When the U.S. puts a tariff on the finished car, it's also taxing all those intermediate parts—even ones that came from allied countries or U.S.-owned factories abroad.

A History of U.S. Tariffs

Tariffs aren't new. They're older than the income tax, older than the Federal Reserve, and older than almost every federal institution. Here's how they've shaped—and sometimes broken—the American economy.

1789

Hamilton's Tariff

The Tariff Act of 1789 was the second piece of legislation ever passed by the U.S. Congress. Alexander Hamilton designed it to fund the new federal government, protect developing American manufacturing, and pay down Revolutionary War debt. Over 87% of federal revenue between 1789 and 1800 came from import duties. Before there was an income tax, tariffs were the tax.

1807

Jefferson's Embargo—the Original Trade War

President Thomas Jefferson went further than tariffs. In response to Britain and France interfering with American shipping during the Napoleonic Wars (including the British practice of impressment—kidnapping American sailors into the Royal Navy), Jefferson signed the Embargo Act of 1807: a complete ban on American foreign trade.

The results were catastrophic. Exports plummeted 79%. Ships sat idle in harbors. Nearly 20% of the population in some New England port towns fell into poverty. Talk of secession spread through New England. It took New York City until 1825 to fully recover.

There was one unintended upside: with foreign goods unavailable, capital and labor flowed into New England textile mills, accidentally accelerating American industrialization. The embargo was repealed in March 1809, three days before Jefferson left office, and is widely regarded as one of the worst policy decisions of his presidency.

1828–1833

The "Tariff of Abominations" & Jackson's Nullification Crisis

The Tariff of 1828 slapped duties of 38–45% on imports. Southerners called it the "Tariff of Abominations" because the South exported cotton and depended on affordable imported goods. The tariff devastated their economy while benefiting Northern manufacturers.

This set off the Nullification Crisis—one of the most dangerous constitutional confrontations before the Civil War. South Carolina, led by Vice President John C. Calhoun, declared the tariff unconstitutional and unenforceable within the state. President Andrew Jackson threatened military action. Congress passed the Force Act, authorizing the president to use the military to collect tariffs. The crisis was defused by a compromise tariff in 1833 that gradually reduced rates over a decade—but it foreshadowed the tensions that would lead to the Civil War.

1930

Smoot-Hawley: The Cautionary Tale

The Smoot-Hawley Tariff Act is widely considered one of the worst economic policy mistakes in American history. President Herbert Hoover signed it on June 17, 1930, raising tariffs on over 20,000 imported goods to protect American industries during the early Depression. Over 1,000 economists signed a petition begging him to veto it. He signed it anyway.

$7B → $2.5B

U.S. exports collapsed

65%

drop in global trade

8% → 25%

unemployment surge

16+

countries retaliated

Canada, Cuba, Mexico, France, Italy, Spain, and a dozen other countries retaliated with their own tariffs. Global trade collapsed. The Depression would have happened regardless, but Smoot-Hawley made it significantly worse. It remains the cautionary tale most cited in tariff debates to this day.

The response: how trade liberalization began

In 1934, FDR's Secretary of State Cordell Hull convinced Congress to pass the Reciprocal Trade Agreements Act, which began the modern era of trade liberalization. It authorized the president to negotiate bilateral trade agreements and reduce tariffs without further congressional approval—the first major delegation of tariff power from Congress to the executive branch. Average U.S. tariff rates fell from 46% in 1934 to 12% by 1962. This framework eventually led to GATT and the World Trade Organization.

The Modern Era: Presidents and Tariffs

After Smoot-Hawley, tariffs mostly trended downward for decades. But they never went away—and several presidents used them as targeted economic weapons.

Nixon's Import Surcharge

1971

Richard Nixon imposed a 10% surcharge on all dutiable imports as part of the "Nixon Shock"—the same package that ended the dollar's convertibility to gold. The surcharge was a bargaining lever to force countries (especially Japan) to revalue their currencies. It lasted four months and was lifted after new exchange rates were negotiated.

Reagan vs. Japan

1981–1988

Despite his free-market reputation, Reagan used trade restrictions extensively: voluntary export restraints on Japanese cars (1981), a 45% tariff on Japanese motorcycles for Harley-Davidson (1983), and 100% tariffs on Japanese electronics when Japan violated a semiconductor agreement (1987). Results were mixed: memory chip prices doubled, but every major Japanese automaker opened a U.S. assembly plant within a decade.

Bush Steel Tariffs

2002

George W. Bush imposed 30% tariffs on imported steel. An estimated 200,000 jobs were lost in industries that buy steel (manufacturing, construction, auto), representing $4 billion in lost wages. The EU threatened retaliation. The WTO ruled the tariffs illegal. Bush withdrew them after 21 months.

Obama Tire Tariffs

2009

Barack Obama imposed a 35% tariff on Chinese tires. It saved an estimated 1,200 tire manufacturing jobs—but consumers shifted to tires from South Korea, Indonesia, and Thailand instead. About 3,700 retail jobs were lost. Each saved job cost consumers roughly $900,000 in higher tire prices.

Trump's Trade War with China

2018–2020

The most significant tariff escalation since Smoot-Hawley. Using Section 301 (unfair trade practices), Trump imposed tariffs in waves on roughly $360 billion of Chinese imports, reaching 25% on many goods. China retaliated on $110 billion of U.S. goods, hitting farmers especially hard. The administration created a $28 billion farm bailout to compensate losses. Studies found the tariff costs were borne almost entirely by American importers and consumers, not by Chinese exporters.

Biden: Keep & Add

2021–2024

Biden maintained most of Trump's China tariffs and added new ones in May 2024: 100% on electric vehicles, 50% on semiconductors and solar cells, 25% on steel, aluminum, and batteries. Biden's approach was more targeted—focused on clean energy and critical manufacturing rather than broad categories.

2025–2026: The Tariff Escalation

2025–present

Trump's second term brought the most aggressive use of tariff power in modern history. 25% tariffs on Canada and Mexico using IEEPA (citing border emergencies). Cumulative tariffs on Chinese goods reaching 145% at peak. On April 2, 2025—"Liberation Day"—reciprocal tariffs of at least 10% on goods from nearly all countries. The overall average U.S. tariff rate rose from 2.5% to roughly 27%—the highest in over a century.

The Supreme Court steps in

On February 20, 2026, the Supreme Court ruled 6–3 in Learning Resources, Inc. v. Trump that IEEPA does not authorize tariffs. Chief Justice Roberts, writing for the majority (joined by Sotomayor, Kagan, Gorsuch, Barrett, and Jackson), said: "Absent from this lengthy list of specific powers is any mention of tariffs or duties. Had Congress intended to convey the distinct and extraordinary power to impose tariffs, it would have done so expressly." This struck down the IEEPA-based tariffs on Canada, Mexico, and the broad "reciprocal" tariffs, though tariffs under other legal authorities (Section 232, Section 301) remain in effect.

Who Gets to Set Tariffs?

This is a constitutional question, and it matters. Article I, Section 8 of the Constitution gives Congress—not the president—the power to "regulate Commerce with foreign Nations" and to "lay and collect Taxes, Duties, Imposts and Excises." Tariffs are fundamentally a congressional power.

So how did presidents end up wielding them? Congress voluntarily delegated its tariff authority through a series of laws:

Reciprocal Trade Agreements Act (1934)

Authorized the president to negotiate trade deals and reduce tariffs without further congressional approval. The landmark shift from legislative to executive tariff power. Born directly from the Smoot-Hawley disaster.

Section 232 — Trade Expansion Act (1962)

Authorizes tariffs on imports that threaten national security. No limit on rates. Used for steel and aluminum tariffs. Still in effect.

Section 301 — Trade Act (1974)

Authorizes retaliation against countries engaged in unfair trade practices. Used for the China trade war. Also still in effect.

IEEPA (1977) — Struck Down for Tariffs

The International Emergency Economic Powers Act authorizes economic regulation during a declared emergency. Trump's second administration used it for tariffs on Canada, Mexico, and the broad "reciprocal" tariffs—the first time IEEPA had ever been used this way. The Supreme Court ruled in February 2026 that IEEPA does not authorize tariffs.

The tension

The core problem: the Constitution gives Congress the tariff power, but Congress spent decades handing that power to the executive branch. Each delegation was meant for specific circumstances (national security, unfair trade, emergencies), but presidents have used these authorities far more broadly than Congress intended. The 2026 Supreme Court ruling is the most significant judicial check on presidential tariff authority in modern history—but Section 232 and Section 301 tariffs remain intact, and Congress has not moved to reclaim its broader authority.

Want to understand how Congress delegates power? Read Executive Orders and How Bills & Votes Work.

Winners and Losers

Tariffs create winners and losers. The debate is always about who ends up where.

Who benefits

Domestic producers in protected industries (in the short term)—they face less foreign competition and can charge higher prices.
The federal government—tariff revenue flows to the Treasury. In 2025, tariffs generated significantly more revenue than in prior years.
Workers in protected sectors—some jobs are preserved that might otherwise move overseas.

Who pays the price

Consumers—higher prices on everything from groceries to cars to electronics.
Downstream manufacturers—companies that buy the protected goods as inputs face higher costs (steel tariffs hurt automakers).
Exporters—retaliatory tariffs from other countries hit U.S. farmers and manufacturers who sell abroad.
Lower-income households—tariffs are regressive, taking a bigger bite from smaller paychecks.

Retaliation: The Trade War Cycle

Tariffs rarely stay one-sided. When the U.S. imposed Smoot-Hawley tariffs in 1930, over a dozen countries retaliated. When Trump imposed tariffs on China in 2018, China hit back on $110 billion of U.S. goods. When tariffs went up on Canada and Mexico in 2025, both countries responded immediately.

Research from the Centre for Economic Policy Research found the 2025 trade war contracted global trade flows by 5.5–8.5% and reduced U.S. consumption by nearly 1%. The Congressional Budget Office projects tariffs will reduce the U.S. growth rate by 0.23 percentage points in 2025 and 0.62 in 2026.

Why This Matters for 2026

Tariffs are not just an economic story. They're a power story. The Constitution says Congress sets trade policy. But over the past 90 years, Congress has handed that power to the president, piece by piece. The Supreme Court just drew a line on IEEPA. But the broader question remains: should one person be able to reshape the economy overnight through tariffs, or should that power stay with the 535 elected members of Congress?

The members of Congress elected in 2026 will decide whether to reclaim that authority, delegate even more of it, or leave things as they are. That's where your vote comes in.

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Where do they stand on tariffs? Do they support reclaiming congressional trade authority? Check their positions at Who's Running.

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