Understanding Tariffs: Who Really Pays the Price

Opinion | By Paul June

Tariffs are not the simple solution some politicians make them out to be.

I’ve spent much of my professional life navigating the complexities of global supply chains, gaining firsthand knowledge of how tariffs and trade policies impact international commerce. In numerous marketing and leadership roles, including as the Director of Product Management at Targus, I’ve tackled these challenges head-on with tangible results. Further, my early understanding of the interconnectedness of global economies was shaped by my father, Robert June—one of Mattel’s original 13 vice presidents and head of their overseas production. I recall how his expertise in international trade sparked thought-provoking discussions around our family dinner table when I was a child.

The truth is that tariffs are a nuanced and often misunderstood tool. When used wisely, tariffs can guide economic policy and protect strategic industries. But when applied recklessly, they can do real harm—not just to corporations, but to everyday American families.

The Role of Tariffs in U.S. Policy

Historically, tariffs have played a significant role in shaping the U.S. economy. Among the first acts signed into law by Congress was the Tariff Act of 1789, which aimed to promote trade and raise revenue for the federal government. Alexander Hamilton championed this legislation, seeing it as a way to protect the fledgling American manufacturing sector from foreign competition and to foster industrial growth. At one point in the 19th century, tariffs provided as much as 95% of federal revenue.

The role of tariffs shifted dramatically in the 20th century. The introduction of the income tax and the industrial expansion of the late 1800s reduced the need for tariffs as a primary source of revenue. By the time the Smoot-Hawley Tariff Act of 1930 raised import duties, the economic fallout was severe, worsening the Great Depression and leading to a global trade war.

Why Low-Labor Jobs Won’t Return

Low-skilled-labor manufacturing jobs are not coming back to the U.S. The reasons go far beyond wages. Factors such as environmental regulations, the availability of raw materials, and a shrinking labor force willing to take on these low-skill, low-paying roles all play a part. Our economy, culture, and infrastructure have simply outgrown the conditions that once supported low-cost, high-volume manufacturing jobs here at home.

This is one of the primary reasons American businesses source products globally from China, Mexico, Vietnam, Canada, Europe, South America, and throughout the Asia Pacific region. Such global partnerships are essential not only for competitive pricing but for the very availability of the products Americans expect on their bricks-and-mortar and virtual store shelves.

That said, tariffs applied with precision to avoid collateral damage to supply chains, allied trade partnerships, and consumer costs, can play a crucial role in protecting strategically important sectors—particularly in defense, aerospace, semiconductors, and advanced manufacturing. Preserving domestic capabilities in these critical areas strengthens national independence and reduces reliance on global supply chains during times of crisis.

The Role of Trade Imbalances

Trade imbalances are often cited as a justification for imposing tariffs, but the reality is far more complex. While a trade imbalance may seem unfavorable, sometimes it’s simply a reflection of a country’s economic strengths and global partnerships.

For the U.S., importing goods allows businesses and consumers access to affordable products that can’t be efficiently produced domestically. Trying to artificially correct these imbalances with broad tariffs can disrupt intricate supply chains, fuel retaliatory measures from trade partners, and risk destabilizing the very markets that American businesses depend on to stay competitive.

Tariffs Today: A Tax on Businesses and Families

Tariffs won’t rewrite any of these realities. They’ll only raise the cost of doing business.

When a tariff is imposed, it’s the U.S. company—not the foreign manufacturer—that pays the tax at the port of entry. That cost has to be absorbed or passed on to the importer, but either way, it immediately tightens cash flow. Payment for these tariffs is due upfront, while sales and supplier payments often happen 30, 60, or even 120 days later. This creates serious strain, especially for smaller businesses.

If experience has taught me anything, it’s that real-world results are predictable: faced with tighter margins and upfront costs, companies hold off on placing orders. Supply chains grind to a halt, inventories run low, and prices climb for consumers. This cycle creates an economic whiplash that can leave even the most seasoned operators scrambling to adjust.

The Ripple Effect

Who feels this impact the most here in the U.S.? Middle-class and working-class families do. The wealthy might see a dent in their portfolios or discretionary spending, but the average household will face tough choices at the kitchen table as the price of everyday essentials climbs.

There’s also a dangerous myth that tariffs only target our adversaries. In practice, they often hit our closest allies just as hard. Blanket tariffs—whether they hit Mexico, Canada, Europe, or Asia—send the same message: America is unpredictable. This breeds instability not just in boardrooms, but across ports, shipping companies, warehouses, and trucking routes, where fewer imports mean fewer jobs and more automation.

Affordable Essentials Versus Luxury Goods

Luxury goods and high-end buyers are largely unaffected by tariffs. Affluent consumers are far less influenced by price fluctuations compared to middle- and working-class families. Instead, it’s tariff-driven cost increases on essential, everyday items—such as appliances, tools, clothing, and toys—that disproportionately affect the working families who rely on them.

During the 2020 tariff wave, China may have been the primary target, but this time around the entire global supply chain is on notice. Other countries are not standing still. They’re already diversifying their trade routes, building new alliances, and creating alternate sourcing strategies to reduce exposure. Clearly, broad-based tariffs don’t just provoke rivals—they also frustrate longtime allies, weakening the global partnerships American businesses rely on.

Precision is Key

Supply chains don’t shift overnight. Establishing a new manufacturing pipeline takes at least six months to a year, and the ripple effects of sudden policy changes can take even longer to resolve.

That’s why tariffs need to be handled with precision. A one-size-fits-all approach is more of a political stunt than an economic solution. Country by country, category by category, clear goals and negotiations are the best ways that tariffs can be used to move the needle in a meaningful—and sustainable—way.

The Rewards and Risks of Tariffs

As with any economic policy, tariffs come with their own set of potential benefits and drawbacks.

Potential Benefits of Tariffs

• Protection of Domestic Industries: Tariffs can make imported goods more expensive, making locally produced goods more competitive and potentially stimulating domestic production.
• Revenue Generation: Tariffs are a form of tax, and the revenue generated can be used by the government for various purposes.
• Counteracting Unfair Trade Practices: Tariffs can be used as a tool to address unfair trade practices, such as dumping or subsidies, that may be harming domestic industries.
• Negotiation Leverage: Tariffs can be used as a tool to negotiate with trading partners on issues such as trade imbalances or intellectual property protection.
• National Security: In certain cases, tariffs can be used to protect strategically important industries or ensure a country’s supply of critical goods.
• Supporting Key Sectors: Tariffs can help support the development and maintenance of key industries, especially those facing challenges from foreign competition or unfair trade practices.

Potential Drawbacks of Tariffs

• Increased Costs for Consumers: Tariffs can increase the cost of imported goods, which can then be passed on to consumers in the form of higher prices.
• Harm to Exporting Businesses: Tariffs can harm businesses that rely on exporting goods to other countries, as they can make those goods less competitive.
• Potential for Retaliation: Imposing tariffs can lead to retaliatory tariffs from other countries, potentially harming global trade and economic growth.
• Economic Distortions: Tariffs can create distortions in the economy, as they can lead to inefficient allocation of resources.

These contrasting outcomes highlight why tariffs are a tool to be used thoughtfully. Without precise application, they risk doing more harm than good—not just to businesses, but to American families and consumers.

The Final Cost: Who Pays the Price?

At the end of the day, while Wall Street might debate percentages, it’s Main Street that’s left making hard decisions about needs versus wants. The cost of tariffs doesn’t stop at our ports. The cost lands in every household, at every register, and in every community.

So, the next time you hear tariffs pitched as a quick fix, ask yourself: who’s really paying for them?

I already know the answer.

I’ve seen the invoices.

It’s not Mexico. It’s not China. It’s not Europe.

It’s you and me.