Tariffs may bring a US$50 billion monthly boost to the US government. But ordinary Americans won’t feel the benefit

Donald Trump’s recent state visit to the UK ended without the removal of steel tariffs, which the host nation had been hoping for. For months, the US president’s array of “liberation day” tariffs have sparked controversy and caused chaos for America’s trading partners.

Ultimately, the US expects to collect more than US$50 billion (£37 billion) a month in revenues from these tariffs. This figure^[1], from US commerce secretary Howard Lutnick, might sound like a fiscal triumph – a rare instance of a government growing revenue without raising taxes. But behind the headline lies a far more complex, and troubling, economic reality.

Tariffs^[2] are not free money. They are taxes on trade, and their costs ripple through the economy in ways that disproportionately burden the people they claim to protect.

The US has increasingly treated tariffs as a first rather than last resort. Under Trump, they are deployed to punish adversaries (trading partners that run large trade surpluses, for example), reshore manufacturing and generate revenue. The message from the president is clear: economic interdependence will be weaponised. And this shift is being enabled by a growing bipartisan consensus that the old model of unfettered free trade has left the US economy exposed.

Many Democrats and Republicans now agree that decades of offshoring and integrating into global supply chains have made the US vulnerable. This was seen not only during crises such as the COVID pandemic, when shortages of medical supplies and semiconductors disrupted everything from healthcare to car production, but also in the face of geopolitical threats from rivals like China.

In response, there is rising support for industrial policies that promote economic nationalism, often under the banner of national security. This means tariffs are no longer seen as an exceptional measure, but a permanent fixture of American economic statecraft.

Even though this political logic is gaining traction^[3], the economic consequences remain regressive. The burden of tariffs is not borne by foreign exporters or large corporations – it is passed directly to consumers in the form of higher prices^[4].

Read more: Tariffs are back in the spotlight, but skepticism of free trade has deep roots in American history^[5]

Research on tariffs^[6] imposed during Trump’s first term (in 2018-19) and more recently confirms this. It found that the full cost of US import tariffs was borne by domestic consumers and importing firms, with no change in the prices received by foreign exporters.

Similarly, another study^[7] demonstrated that the costs of US tariffs on Chinese goods were almost entirely passed through to American consumers and businesses.

The illusion of a win for the US through tariffs is based on the assumption that there will be no retaliation from other countries. But that is not the case.

Tariffs may indeed decrease the US trade deficit, and bring a modest boost to consumer welfare if tariff revenues reduce the income tax burden for Americans, as Trump has suggested^[8]. But it has been shown that^[9] reciprocal tariffs which increase the prices of many household goods would more than offset these welfare gains, making US households worse off in the end.

Raising tariffs unilaterally as Trump has done, combined with a global trade war, has been found to lead to^[10] a sharp contraction in US GDP, rising inflation, and a widening trade deficit. The same analysis confirmed that any US welfare gains from tariffs vanish when the rest of the world retaliates.

So why does Trump continue to champion tariffs? His persistence points to a deeper political economy puzzle, and suggests boosting the welfare of average Americans might not be part of his policy calculus.

Tariffs may be economically inefficient and socially regressive, but they are politically potent. They generate headlines, feed narratives of national strength, and allow leaders to cast themselves as defenders of American workers. All the while, the true costs are diffuse, delayed, and buried in monthly grocery and retail bills.

In this light, tariffs are less about economics and more about optics. It is a performance of power that sidesteps the realities of global supply chains and consumer vulnerability.

So, who wins and who loses? The evidence paints a nuanced picture. Losers are easy to identify: American consumers, especially low- and middle-income households who spend a larger share of their income on manufactured goods. While boasting about collecting billions in tariff revenues, Trump is yet to outline any specific plan to redistribute those revenues to low- and middle-income households.

Then there are the small businesses reliant on imported products, and the farmers and exporters caught in retaliatory crosshairs. US soybean exports to China, for example, plummeted in 2018^[11] and again in 2025^[12], with zero orders coming from China so far this year.