Myth vs Fact

Trade and Tariff Policy

No, Americans pay. Tariffs are a tax, and by law they are paid by the U.S.-based person or company importing the tariffed goods. American companies have been “eating” a majority of the new tariffs so far this year, which has led to hiring freezes and profit warnings in heavily tariffed industries (e.g., auto manufacturing). Companies are now proceeding to pass more of these tariff costs on to customers, producing a hit to the typical American household of approximately $2,400 annually.

No, cost pressures eventually compel companies to pass tariffs on to their customers. In fact, one of the main aims of protective tariffs is to allow domestic producers to raise prices. The U.S. International Trade Commission’s 2023 review of tariffs imposed on home washing machines noted that the Trump administration itself expressly defended the tariffs in 2018 on the grounds that they would increase both import prices and U.S. prices.

No, tariffs on Canadian goods are harming U.S. consumers, manufacturers, and farmers. Americans have benefited immensely from trade with Canada, which is the largest U.S. export market in the world, including for U.S. manufactured goods; in fact, the U.S. has a significant trade surplus in manufactured goods trade with Canada. After the U.S.-Canada Free Trade Agreement was signed in 1988, Canada eliminated tariffs on 99% of U.S. exports. Trade with Canada has long played an essential role in Michigan’s economy, and tariffs are hitting automotive and other manufacturing hard in Michigan because of the supply chain for parts that end up in products assembled in our local factories. There are also indications that the tariff conflict is hurting Michigan’s tourism industry as Canadian tourists stay home, resulting in lost business in communities around the state, including mom-and-pop restaurants and hotels that depend on these visitors. Imposing tariffs on this major NATO ally also undermines U.S. defense industries as Congress declared Canada as an integral part of the U.S. defense industrial base under the Defense Production Act in 1993.

No, higher tariffs lead to larger trade deficits, not surpluses, and the tariffs imposed this year have contributed to a 25% increase in the U.S. trade deficit in the first nine months of 2025. According to data from the Geneva-based International Trade Center, 25 of the 30 countries with the world’s highest tariffs have trade deficits. Nearly all the world’s high-tariff countries have very low incomes, and the few high-tariff countries with trade surpluses—such as Algeria, Chad, and Congo—serve as poor models for U.S. economic policy. The U.S. trade deficit shows that Americans are spending more than they produce, principally in the large U.S. fiscal deficit. Servicing that deficit requires capital inflows (especially foreign purchases of U.S. Treasuries), which appear in U.S. national accounts as a capital account surplus—always mirrored as a trade or current account deficit

No, the U.S. manufacturing sector is one of the chief victims of tariffs. Inputs used in U.S. factories—including raw materials, parts and components, and capital equipment—make up more than half of all U.S. imports, so manufacturers wind up bearing most of these costs. New tariffs in 2025 are the chief reason why the U.S. manufacturing sector has shed jobs every month this year but one. Some industry subsectors that have secured especially high tariffs—such as steel production—do benefit, but downstream manufacturers that use steel as an input are hurt—and these industries employ 60 times as many Americans. Tariffs also hurt exports of manufactured goods as higher domestic production costs undermine their price competitiveness in markets abroad.

No, the United States today has much higher tariffs than those of its major trading partners—by far the highest tariffs of any major economy (averaging about 20%). Thanks to trade agreements like the United States-Mexico-Canada Agreement (USMCA), key partners such as Canada and Mexico have long imposed almost no tariffs on U.S. exports; Australia, Singapore, and South Korea among the 20 countries where this is true. Other partners such as the European Union and Japan levy a tariff of just 2-3% on U.S. exports. Only China and some developing countries had tariffs higher than those of the United States in January 2025, but today U.S. tariffs are even higher than those.

Q&A from the U.S. International Trade Commission on tariffs from a trade practitioner’s perspective

Q&A from Customs and Boarder Protection on Section 232 tariffs, exclusions, inclusions, and how Section 232 tariffs interact with IEEPA tariffs