Who Benefits Most from Tariffs?

Tariffs, or taxes imposed on imported goods, are often pitched as a tool to protect domestic economies, but their impact is a tangled web of winners and losers. While they can generate government revenue and shield certain industries, the question of who truly benefits most is more nuanced than political rhetoric suggests. This article explores the primary beneficiaries of tariffs, their short- and long-term effects, and the broader economic implications, drawing on economic principles and real-world examples.

Domestic Industries: The Immediate Winners

The domestic industries that are the focus of tariffs are the ones that directly benefit from them. Tariffs increase the competitiveness of domestically produced alternatives by raising the cost of imported items. For instance, a tariff on imported steel raises the price of foreign steel, allowing U.S. steelmakers to charge higher prices or capture more market share without facing cheaper competition. Historically, industries like U.S. sugar producers (protected since 1789) and automakers (shielded by the 1964 "chicken tax" on pickup trucks) have benefited from such policies, maintaining profitability despite global competition.

However, not all domestic industries win equally. Tariffs are most effective when they target sectors with existing infrastructure and capacity, such as U.S. steel or aluminum industries. In cases where domestic production is minimal or nonexistent, like certain electronics, tariffs may simply raise costs without spurring local manufacturing, as rebuilding supply chains can take decades.

Government Revenue: A Fiscal Boost

Governments imposing tariffs collect revenue directly from importers, which can be significant. In the U.S., tariffs were a primary revenue source before the 1913 income tax, accounting for up to 90% of federal funds from 1790 to 1860. Even today, tariffs generate billions annually $77 billion in fiscal year 2024 alone though this is a small fraction of total U.S. revenue ($5.27 trillion). This revenue can fund public services or offset tax cuts elsewhere, as proposed in some policy agendas. However, the scale of modern economies means tariffs alone cannot replace broader tax systems, limiting their fiscal impact.

Workers in Protected Industries: A Mixed Bag

Tariffs are often justified as job-saving measures, particularly for manufacturing workers. By shielding industries from foreign competition, tariffs can preserve or create jobs in sectors like steel or automotive production. For example, the 2018 U.S. Employment in the steel and aluminum industries increased slightly as a result of higher tariffs. Yet, the broader impact on employment is less rosy. Higher input costs (e.g., pricier steel) ripple through industries like manufacturing, which employs far more workers in steel-using sectors (over two million) than in steel production itself. This led to a net loss of manufacturing jobs during the 2018-2019 trade war, as higher costs reduced competitiveness.

Moreover, job gains are often temporary if industries fail to innovate under tariff protection. Without pressure from competition, firms may become less efficient, leading to long-term stagnation.

Consumers: The Hidden Losers

Even though governments and domestic industries may benefit, tariffs frequently hurt customers the most. Importers, typically U.S. companies, pay the tariff, but studies show these costs are largely passed on to consumers through higher prices. A 2019 study found that U.S. consumers and firms bore most of the cost of Trump-era tariffs, with prices rising for goods like clothing and electronics. According to the Yale Budgeting Lab, tariffs in 2025 might result in a 2.3 percent rise in prices for consumers, costing the average household $3,800 a year, with households with lower incomes suffering the most ($1,700 loss). This regressive impact disproportionately affects those who rely on affordable imports for necessities.

Foreign Exporters and Retaliation: Collateral Damage

As the selling price of their goods increase in the nation that imposes tariffs, foreign exporters suffer a decline in demand. For example, Chinese firms saw significant losses during the 2018 U.S.-China trade war, with one study estimating three times more damage to China’s economy than the U.S.’s. However, foreign exporters may absorb some costs by lowering prices to maintain market share, effectively sharing the tariff burden.

Retaliatory tariffs are another consequence. When the U.S. imposed tariffs on Canada and Mexico in 2025, both countries proposed countermeasures, escalating trade tensions. Such tit-for-tat policies can spiral into trade wars, reducing global trade volumes and harming all parties involved.

Strategic and Geopolitical Leverage

As a tools for foreign policy, tariffs may present countries with the ability to negotiate. For instance, the U.S. has implemented tariffs to place pressure on Canada and Mexico on immigration and fentanyl smuggling. By targeting specific goods or countries, tariffs can signal disapproval of practices like currency manipulation or labor abuses, potentially forcing policy changes abroad. However, this approach risks escalating tensions, as seen in the 1807 Embargo Act, which backfired by harming U.S. trade without achieving its goals.

Long-Term Considerations: Who Really Wins?

While tariffs can provide short-term relief for specific industries or government coffers, their long-term benefits are debated. Proponents argue they can rebuild industrial capacity and reduce trade deficits. A 2024 study claimed Trump’s first-term tariffs led to “significant reshoring” in manufacturing, though evidence suggests the impact was modest. Critics, including most economists, argue tariffs reduce economic efficiency by distorting markets and raising prices, leading to net welfare losses (deadweight loss). A 2018 University of Chicago survey found no top economists believed steel and aluminum tariffs would benefit Americans overall.

In addition, by banning inefficient industries from competing, tariffs might hinder innovation. The 1964 “chicken tax” helped U.S. automakers like Ford dominate the pickup truck market, but it also reduced incentives to innovate, leaving consumers with fewer choices.

Conclusion: A Balancing Act

The primary beneficiaries of tariffs protected domestic industries and government revenue—come at the expense of consumers and broader economic efficiency. While strategic tariffs can protect critical sectors or serve geopolitical goals, blanket or excessive tariffs risk higher prices, reduced trade, and retaliatory measures that harm all parties. The U.S.’s low trade-to-GDP ratio (25% vs. 59% globally) gives it some leverage, but the costs often outweigh the benefits unless tariffs are narrowly tailored and paired with policies to boost domestic innovation and competitiveness. Ultimately, who benefits most depends on the tariff’s design, implementation, and the economic context—rarely a one-size-fits-all solution.