The price of protection: a deep dive into tariffs

May 2025

Tariffs have been a fundamental tool of US economic policy since the nation’s founding. A tariff is essentially a tax on imported goods and services. By raising the cost of foreign products, tariffs can influence where businesses source materials and where consumers buy goods.

In the course of history, tariffs have played a significant role in the formation of nations, industry, and trade. Tariffs were once a primary source of federal revenue for the United States. Over time, their role has shifted – from funding the government in the 19th century to protecting industries or negotiating trade terms in the 21st.

This paper provides an overview of what tariffs are and how they function, then analyzes their economic pros and cons, including effects on growth, inflation, jobs, productivity, and financial markets.

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