The costs of tariffs are always shared — and domestic citizens inevitably bear a significant portion of the burden.

The answer to the question “Who pays the cost of tariffs?” is obviously important. If the costs of all tariffs were paid exclusively by foreigners, with no negative consequences suffered by citizens of the country that imposes the tariffs, the case for a policy of free trade would be far weaker than if tariffs inflict some damage on the domestic economy. Ethical objections to tariffs would still be available, but the conventional economic case against protective tariffs would be null and void, as that case focuses almost exclusively on the economic welfare of citizens of the home country.

Yet the costs of tariffs are always shared by buyers and sellers of tariffed goods and services. This inevitability springs from the fact that all trade is mutually advantageous. Because tariffs prevent some trades from occurring that would otherwise occur absent the tariffs, both parties to the obstructed trade suffer. In some cases, would-be buyers suffer more than do would-be sellers, and in other cases the bulk of the suffering is inflicted on would-be sellers. But in all cases, tariffs inflict harm on both parties.

The Simple Analytics of the Tax Called “Tariffs”The Simple Analytics of the Tax Called “Tariffs”

Two Different Manifestations of Tariffs’ CostsTwo Different Manifestations of Tariffs’ Costs

...read more at thedailyeconomy.org