To Tariff or Not to Tariff?

The Truth Behind the President's Economic Plan

Photo by Lukas Hartmann

In recent days, President Trump’s critics have claimed that imposing tariffs on our North American neighbors will harm the economy and the relationships. Many see his proposal as reckless and unfair.

Is this truly the case? There’s no sufficient evidence to substantiate that claim. On the contrary, let’s look at the many benefits tariffs do and could provide.

The History of Tariffs

There was a time in history when foreign governments, not the American taxpayer, funded our government. In 1844, Abraham Lincoln said, “Give us a protective tariff, and we will have the greatest nation on earth."

In 1890, under President McKinley, the average tariff reached 48%. McKinley strongly supported tariffs as a way to protect growing American industries.

By 1912, tariffs accounted for nearly 95% of federal revenue.

However, this trend ended in 1913 when the Federal Government imposed an income tax on citizens instead. Revenue from tariffs continued to decline until 2024, when only $77 billion, or 1.57% of the total federal revenue, came from tariffs on foreign goods.

NAFTA

The most decisive blow to the protections tariffs provided American industries came in 1993. The North American Free Trade Agreement (NAFTA) eliminated tariffs on agriculture, textiles, and automobiles entering the U.S., causing foreign products to flood the domestic market.

Within 16 years, 682,000 manufacturing jobs were lost, primarily within Michigan, Texas, California, and New York. This form of globalism in the name of “free trade” may have caused the large trade deficits we’ve seen for decades and the closing of factories nationwide.

There’s another devastating reality that few have attributed to the NAFTA deal: increased illegal migration and the exploitation of farm workers from Mexico.

“NAFTA, by permitting heavily-subsidized U.S. corn and other agri-business products to compete with local Mexican farmers, has driven many of those Mexican farmers off their lands in search of alternative employment,” according to a report on NAFTA’s impact on migration.

Tariffs for thee but not for me?

Is it unnecessary or even egregious to use tariffs to protect certain industries? Canada doesn’t think so. To prevent a surplus, Canada sets limits on dairy imports. Milk and other products within that margin coming from the U.S. are taxed at 7.5%. However, any products over that limit are hit with a 270% tariff as a deterrent. 270%!

Canada is literally eating our lunch when it comes to trade.

Explore four ways tariffs can grow the U.S. economy:

1. Increase Revenue and Lower Taxes

In 1961, 6% of U.S. revenue came from tariffs. Last year, tariffs accounted for only 1.57% of total federal revenue. As tariffs decrease, income taxes are used to subsidize our government.

This year, the total revenue from income taxes, payroll taxes, and corporate taxes is estimated to total nearly $5 trillion. Increasing tariffs could lighten the burden on the American taxpayer.

2. Lower Other Countries’ Tariffs on American Products

Although some on both sides of the aisle find Trump’s rhetoric unpalatable, those who can look beyond the cloud of smoke will see the President’s end game: reciprocity. The threat of 25% will soon become the same rate at which American products are taxed. In many cases, this will result in Mexico, Canada, or other trading partners reassessing their trade policies when it comes to American products.

3. Incentivize Companies to Build More in America

In order to avoid tariffs, manufacturers worldwide have an option: build plants in the U.S. This move could potentially create thousands of new American jobs and kick-start the economy.

And it's already working. On Friday, President Donald Trump announced that electronics and software giant Apple was planning to relocate its manufacturing operations from Mexico to the United States, according to MSN.

4. Promote the Sale of American Goods

Those who warn that increased costs will be passed on to consumers overlook one simple solution: buy American! When cheap foreign products are allowed to flood the market across the country, American industries and workers pay the price.

America produces a larger percentage of our own consumer goods than our neighbors. While trade (i.e., selling their products to the U.S. and abroad) accounts for 67% of Canada’s GDP, 73% of Mexico’s GDP, and 37% of China’s GDP, it accounts for only 24% of the U.S. GDP. In simple terms, we don’t need them as much as they need us.

The Wrap Up

According to the Economic Policy Institute,

Free trade has created a large trade deficit in the United States for decades, leading to the closure of many factories and costing the United States millions of jobs in the manufacturing sector. Trade deficits replace well-paying manufacturing jobs with low-wage service jobs. Moreover, trade deficits lead to significant wage losses, not only for workers in the manufacturing sector but also for all workers throughout the economy who do not have a university degree. For example, in 2011, 100 million full-time, full-year workers without a university degree suffered an average loss of $1,800 on their annual salary.

As we move into 2025, will we keep the burden of funding the government on the taxpayer while limiting employment opportunities, or will we use tools at our disposal to protect our industries and livelihoods?

I’m confident that we will witness, as time moves on, that Trump’s tariff plan is fair to both the American worker and our trade partners.