Philip Cross: U.S. Tariffs Hurt Americans More Than Exporting Nations
It's becoming increasingly evident that the most effective strategy to counter President Donald Trump's tariff threats may be to simply allow them to run their course, as they primarily raise prices for American consumers rather than significantly harming targeted nations.
The Economic Burden of Tariffs
Economists consistently agree that tariffs impose greater costs on the country implementing them than on exporting nations. A recent study by researchers at the New York Federal Reserve reveals that the average tariff rate on U.S. imports surged from 2.6 percent to 13 percent in 2025, with nearly 90 percent of the economic burden falling on American firms and consumers.
Throughout this year, Trump has threatened numerous tariffs, including a 10 percent tariff (later increased to 25 percent or more) on European Union nations resisting his hostile takeover of Greenland, a 25 percent tariff on countries trading with Iran, and various tariffs targeting Canada for establishing trade relations with China and resisting assimilation into the U.S. economy. Additional threats have included blocking the opening of the new Gordie Howe Bridge connecting Windsor and Detroit.
Canada's Experience with Retaliatory Tariffs
Canada's response to Trump's Liberation Day tariffs provides a clear case study in the counterproductive nature of retaliatory measures. The Carney government imposed Canadian tariffs on a wide range of U.S. products, which ultimately had no material impact on the overall U.S. economy but significantly increased prices for Canadian consumers. This economic damage was further compounded by the potential for higher interest rates. Recognizing this mistake, the government withdrew the tariffs after several months without securing any concessions from the United States.
The Political Consequences of Higher Prices
With the high cost of living remaining the primary concern for American voters, exacerbated by recent spikes in oil prices, allowing Trump's tariffs to exert upward pressure on consumer prices could have significant political ramifications. In an election year, sustained price increases could increase the likelihood of Democrats regaining control of at least the House of Representatives. This development would embroil the Trump administration in extensive investigations and potential impeachment proceedings while reinforcing the influence of administration officials who understand the economic harm caused by tariffs.
The tariffs particularly hurt small businesses due to their lower profit margins, making them more vulnerable to cost squeezes. This is significant because consumers frequently interact with small business owners who can directly explain how tariffs contribute to higher prices.
The Psychological Impact on Global Leaders
The downside of waiting for Trump's tariffs to self-destruct within the U.S. political system is the demeaning spectacle of watching global leaders approach him as supplicants, as noted by financial journalist Philip Coggan in his recent book, The Economic Consequences of Mr. Trump.
Responding to Trump with tit-for-tat tariffs inadvertently endorses his mistaken belief that foreigners bear the cost of his tariffs. Many leaders' fear of threatened tariffs suggests they don't fully believe their own rhetoric about trade being mutually beneficial and tariffs primarily harming the imposing country. Their actions reinforce mercantilist thinking and encourage further tariff threats.
National leaders trading with the U.S. need to demonstrate the courage of their convictions that trade benefits both parties involved. By allowing Trump's tariffs to exert their inevitable upward pressure on American prices and supply chain disruptions, they may ultimately achieve more than through retaliatory measures that primarily harm their own economies.
Philip Cross is a senior fellow at the Macdonald-Laurier Institute.
