The Boomerang Effect: Why Protectionism Bites the Hand That Feeds It

In the theatre of political populism, the tariff is the ultimate crowd-pleaser. It is presented as a shield—a sturdy, patriotic barrier erected to protect the American worker from the "unfair" practices of foreign competitors. It appeals to a deep-seated desire for self-reliance and a nostalgic vision of an industrial past where everything from steel to sneakers was stamped "Made in the U.S.A."

However, economic reality rarely adheres to the script of political theatre. As we move deeper into the administration’s renewed era of protectionism in late 2025, the dust is settling, and the data is emerging. The uncomfortable truth is that tariffs are not a tax on foreign governments; they are a sales tax on American families. And cruelly, they fall hardest on the very demographic the President claims to be saving.

The Anatomy of a Price Hike

To understand why tariffs backfire, one must understand the mechanics of the supply chain. When the United States imposes a 20% or 60% tariff on imported goods—whether it be Chinese electronics, Mexican auto parts, or European steel—the foreign exporter does not simply absorb that cost out of the kindness of their heart.

The cost is passed down the line. The importer pays the tariff to the US Customs and Border Protection. To maintain their margins, the importer raises the price for the wholesaler. The wholesaler raises the price for the retailer. Finally, the retailer changes the price tag on the shelf.

Who pays the final bill? The construction worker buying a new drill. The single mother buying school shoes. The retiree buying a toaster.

This is not theoretical. We saw it during the trade wars of 2018-2019, and we are seeing it accelerated now. A tariff on aluminium doesn't just hurt the Chinese smelter; it increases the production cost of every Ford truck, every can of Budweiser, and every window frame made in America. Domestic manufacturers, facing higher input costs, are forced to raise their own prices or cut labour costs to survive. The "shield" becomes a suffocating blanket.

The Regressive Nature of Protectionism

The most insidious aspect of broad-based tariffs is that they are structurally regressive.

Wealthier Americans spend a smaller percentage of their income on tradable goods (clothing, furniture, electronics) and a larger percentage on services (education, financial planning, luxury travel), which are generally immune to tariffs.

Working-class and middle-class Americans, however, spend a disproportionate amount of their paycheck on physical goods—the very items being taxed. When the price of a washing machine jumps by $100 due to steel tariffs, that price hike represents a significant portion of a low-income family's monthly budget. To a wealthy family, it is a rounding error.

By implementing sweeping tariffs, the administration has effectively legislated a consumption tax that bypasses Congress. It is a wealth transfer from the pockets of American consumers to the U.S. Treasury, with the friction burning up the efficiency of the economy along the way.

The Illusion of Manufacturing Renewal

The central promise of the tariff regime is the "reshoring" of jobs—the idea that if we make foreign goods expensive enough, factories will reopen in the Rust Belt.

While there are isolated anecdotes of reshoring, the macroeconomic picture is far more complex. Modern manufacturing is capital-intensive, not labor-intensive. If a factory returns to Ohio from Shenzhen, it does not return with 1,000 jobs for high-school graduates. It returns with 50 jobs for robotics engineers and a fleet of automated arms.

Furthermore, retaliatory tariffs from trading partners—an inevitable reaction—cripple American exporters. We have seen this play out with American soy and corn farmers, who often constitute the President’s base. When China or the EU retaliates, they target American agriculture. The government is then forced to use the revenue raised from tariffs to subsidize the farmers who were hurt by the tariffs in the first place. It is an economic ouroboros, a snake eating its own tail, creating a cycle of dependency rather than prosperity.

The Inflationary Spiral

In 2025, the global economy is still fragile, battling the remnants of post-pandemic inflation. Injecting tariffs into this environment is akin to pouring gasoline on a smoldering fire.

By artificially raising the price of imports, domestic producers are given "cover" to raise their own prices. If a foreign car becomes $3,000 more expensive due to tariffs, the domestic competitor doesn't need to keep their price low; they can raise it by $2,500, undercut the import slightly, and pocket the difference. The result is economy-wide inflation.

This forces the Federal Reserve into a corner. To combat the tariff-induced inflation, they must keep interest rates higher for longer. This, in turn, makes mortgages and car loans more expensive for the average American. The worker who was promised a job by the tariff policy instead finds themselves priced out of the housing market by the interest rate reaction to that same policy.

Conclusion

The economics of autarky—of trying to be an economic island—have failed repeatedly throughout history, from the Corn Laws of 19th-century Britain to the Smoot-Hawley Tariff Act of 1930, which deepened the Great Depression.

The President’s strategy is rooted in a zero-sum view of the world: for America to win, someone else must lose. But trade is positive-sum. When we trade, we access goods more cheaply, freeing up capital to invest in innovation and services where the US actually has a comparative advantage.

By locking the US economy behind a wall of tariffs, we are not punishing our adversaries. We are punishing ourselves. We are making our industries less competitive, our goods more expensive, and our people poorer. The tragedy is that this economic pain is being sold as a patriotic victory.