In February 2025, President Trump implemented an extra 25 percent tariff on imports from Canada and Mexico and a 10 percent tariff on imports from China, which doubled to 20 percent last week. There’s also a 10 percent tariff on energy resources from Canada. This is significant as goods from China, Mexico and Canada accounted for more than 40 percent of imports into the US in 2024. On March 11, 2025, the uncertain climate led many investors to withdraw from tariffed sectors with elastic demand, causing a US stock market decline. So let’s cut to the chase and analyse how tariffs work, how effective or counter-effective they are, their historic trend and their similarity to subsidies. …

Support for free trade—a key pillar of the free market—peaked during the globalization era after the WTO’s formation in 1995. However, governments often intervene by imposing tariffs, which are taxes on imports. Alongside quotas, tariffs are significant trade barriers, increasing prices for consumers and forcing them to buy costlier domestic products if demand is inelastic. This is part of a wider subject of Foreign Trade Policy. …

So the final question is: Are tariffs any good at all, at least when they’re targeted? I would answer by quoting Milton Friedman’s excerpt from his speech at the University of Utah in 1978 when he exposed the unreasonableness of steel tariffs:

You know you could have a great employment in the city of Logan, Utah, of people growing bananas in hot houses. If we had a high enough tariff on the import of bananas, it could become profitable to build hot houses and grow bananas in hot houses. That would give employment. Would that be a sensible thing to do? If that isn’t sensible then neither is it sensible to artificially restrict the import of steel.