Opinion | By Paul June
Tariffs are often framed as a patriotic tool that punishes foreign competitors while rewarding American households. But this framing obscures the real mechanics—and consequences—of tariffs.
As 2025 economic data rolls in, it’s clear that tariffs are not a free lunch. They’re a tax—one paid by U.S. companies and ultimately by consumers in the form of higher prices. And their ripple effects are beginning to show up in job losses and rising bankruptcies.
Let’s Dispense with a Couple of Myths
Myth #1: “Foreign Countries Pay the Tariffs”
One of the most persistent misconceptions is that foreign countries pay tariffs. In reality, it’s U.S. importers—usually American companies—who foot the bill when bringing in foreign goods. These surcharges are paid at the point of entry into the United States—typically a U.S. port, airport, or customs facility—where imported goods are inspected and processed by U.S. Customs and Border Protection (CBP). To stay afloat, importers almost always pass the costs of tariffs on to consumers.
So yes, you are paying more at the store—and no, it’s not because China is footing the bill!
Myth #2: “Tariffs Are Free Money for Americans”
Proposals such as the so-called “Tariff Dividends” suggest redistributing tariff revenue to American households. But this isn’t a windfall from abroad—it’s a reallocation of money collected from U.S. businesses. So, if the Tariff Dividends happen, Americans will be funding their own rebates. You’ll pay more at the store for foreign goods, then receive a partial refund from the government.
As a form of domestic cost shifting, this raises a fundamental fairness question: should Americans be taxed more (in the form of tariffs) just to receive a portion of their own money back?
And here’s where things get even more perplexing.
One could argue that the proposed tariff-funded dividends, by relying on government intervention to reallocate wealth, echo core socialist principles—namely, state-led redistribution and income support disconnected from labor. Viewed through this lens, tariff dividends could function less as free-market innovation and more as a populist precursor to broader social welfare models.
Is this really the path we want to take—a government-administered rebate system funded by consumer-paid taxes, framed as patriotic capitalism but operating like a backdoor entitlement? That’s about as economically “circular” as it gets.
Tariffs, Jobs, and Bankruptcy Trends
Jobs Impact
- According to modeling by Yale’s Budget Lab, the number of payroll jobs are “lower than otherwise” would be expected by about 490,000 due to 2025 U.S. tariffs and foreign retaliation.
- The same model estimates that by year’s end, unemployment will be about 0.3 percentage points higher than it would be without these tariffs.
- Trade-exposed industries that compete directly in international markets are highly sensitive to global price changes and trade policies. The Peterson Institute for International Economics finds employment lower across these sectors under the current tariff schedule.
- According to the U.S. Bureau of Labor Statistics, manufacturing payrolls are down about 33,000 jobs through October 1. While not a clean “tariff-only” figure, it aligns with the Peterson Institute study.
Of course, interest rates, demand shifts, and other policies also play a role in these numbers—but the directional signal is clear: tariffs are part of the drag.
Bankruptcies
While bankruptcies can’t be directly pinned on tariffs alone, bankruptcy activity in 2025 is elevated—especially among larger companies. Tight financing costs and weaker demand are primary drivers, but tariff uncertainty is increasingly cited as a contributing factor.
- U.S. bankruptcy filings of all types for the 12 months ending June 30, 2025, are up 11.5%. Business filings rose 4.5%, and non-business filings jumped 11.8%.
- Corporate bankruptcies (larger firms) accounted for 371 filings in the first half of 2025—the fastest first-half pace since 2010.
- Mega bankruptcies (those involving companies with $100M+ in assets) hit 117 filings over the last 12 months—44% above the 2005–2024 annual average.
- Commercial Chapter 11 bankruptcies rose 3% year-over-year in September 2025, with broader commercial filings also up.
Tariffs Are a Tax, Not a Gift
Looking closely at 2025’s economic numbers, the truth becomes clear: tariffs aren’t free money, they’re a tax on imported goods—one that U.S. companies pay and consumers absorb. Far from delivering effortless gains, tariffs impose a tax burden that ripples through supply chains, squeezes consumers, strains the labor force—and hits corporations where it hurts.
We’ll be keeping a close eye on how tariff policy evolves—because behind every headline is an economic reality. The numbers may shift, but the underlying mechanics remain: tariffs are a tax, and someone always pays.
