Cause for Consternation

Tariffs are once again in the news cycle, this time caused by Canada’s “discriminatory treatment of American products.” The administration is threatening a 50% tariff against certain Canadian goods as retaliation. What started on “Liberation” Day last April as a triumphant signature policy move by the administration has devolved into a confusing and embarrassing failure.  

As many readers know, the Supreme Court struck down the legality of the IEEPA tariffs in February 2026 as unconstitutional, requiring that the administration return duties collected during that time (we’re still waiting!). 

With IEEPA deemed unconstitutional, the administration has changed tack and is now relying on legacy statutes like Section 232 and Section 301 to implement their broader tariff strategy. The administration, thus, has finally found clever ways to implement its tariff policy within the current statute framework. For those that think tariffs are a good idea, this is cause for celebration. For the roughly 60% of Americans, including myself, that disapprove of such policies, this is cause for consternation.

Tariffs are essentially a tax paid on goods from other countries. Like taxes, they can raise revenue, but also like taxes, they can stifle GDP growth and discourage investment. The administration has consistently claimed that the tariffs are paid for by countries and companies selling into the United States. This is empirically false. As the New York Fed confirmed in February 2026, 90% of the IEEPA tariff burden fell on US firms and consumers, not on foreign firms. 

This makes sense when logically tested. If a firm is selling paper into the United States, for example, it can address a 10% tariff in three ways: 1) Sacrifice margin and absorb the tariff cost; 2) Pass the tariff cost along to its customers; 3) Exit the market entirely. In a commodity market like paper, absorbing a 10% tariff is simply not within the realm of possibility as it would likely make selling the product unprofitable. 

The firm could abandon the market, but this would harm revenue. Therefore, the firm’s most logical option is to pass all or most of the tariff along to the customer. The customer can either absorb that new additional cost, pass it along to its customers, or look for a new vendor.

The administration might argue that a domestic supplier using American labor could replace this insidious foreign supplier. Of course, that suggestion ignores that most paper mills run near full capacity, and that the last greensite paper mill was built in 1990. There is no additional capacity. The domestic alternative knows this as well and has a very convenient opportunity to raise prices by 10%. Thus, the customer of the paper mill ultimately also passes a 10% price increase onto its customer and so on and so forth. What is the result? The American consumer pays 10% more and is worse for it.

Beyond the annoyance of American consumers being on the hook for these tariffs is which American consumers are on the hook. Not only are tariffs a tax, but one that disproportionately affects low
income Americans. 

According to Yale’s Budge Lab, which is a non-partisan policy research center that provides in-depth analysis of federal policy proposals for the American economy, the bottom half of American households pay approximately 2.5x more as a share of income to tariffs than the top decile (4% vs 1.6%). While the top decile are paying more per year on average ($8,100), the lowest rung ($1,700) gets hit hardest. This segment of Americans is already feeling the squeeze with the past five years of inflation; these tariffs add greater pressure and reduce spending.

Perhaps most importantly, the tariffs tend to actually destroy the manufacturing jobs that they were meant to create. Roughly 56% of US imports in 2024 were intermediate inputs, chemicals, parts, metals, pulp. Adding a tariff on these inputs, as we’ve discussed above, is taxing American manufacturers. This undermines GDP and job growth. 

According to Flaaen & Pierce, two Federal Reserve economists, the 2018-19 tariffs on China actually resulted in an estimated loss of 230,000 American manufacturing jobs while providing no measurable employment benefits to the protected industries themselves. Recent data concur with this assessment. From December 2024 to December 2025, the manufacturing sector had a net loss of about 70,000 jobs. While metal-adjacent industries that benefited from the tariffs saw job increases, their manufacturing customers in sectors like machinery, computers, and transportation equipment saw job losses.

The administration has also often pointed to trade deficits as a reason to implement such tariffs. The problem is that tariffs don’t fix trade deficits, which are driven by low domestic savings compared to investment, high government budget deficits, a strong national currency that makes imports cheaper, and rapid domestic economic growth that boosts consumer demand for foreign products. Taxing imports pushes the dollar up and suppresses exports, which fuels trade imbalances rather than fixing them.

There is, I think, only one good reason to implement tariffs: national security. There are industries in which it is genuinely in our country’s best interest to protect and cultivate. Without a robust domestic arms industry, we could increasingly find ourselves exposed to the threat of China. 

Ensuring that the supply for our defense industry is well-insulated from dependence on China is essential to the national security of not only ourselves, but our allies. This caveat, however, is a very small exception to what has been illogical overzealotry from this administration.

All of the preceding critiques point to the fundamental inefficiency of tariffs. They burden consumers with additional cost, depress demand, and reward inefficient domestic producers. No one is better off from tariffs except for the lucky few domestic firms that would otherwise be dying from lack of investment, inefficient assets, and unionized labor. I hope an ensuing administration will come to its senses and provide relief to Americans and American manufacturers sooner rather than later.

Alex Hoffman is a third-generation family member at Channeled Resources Group, where he serves as Market Manager. Alex is currently pursuing his MBA from the University of Chicago’s Booth School of Business. In his spare time, he enjoys playing squash, reading, and arguing.