“Tariffs: What They Are and What They’re Not” (part 1)

Tariffs are back in the news again. But for most of us, they’re not something we deal with day to day. They don’t show up on a receipt. You won’t see a line item at checkout labeled “tariff.” So it’s easy to forget how they work—and more importantly, who they actually affect.

Let’s start with this: tariffs don’t require any kind of negotiation with the country they’re targeting. There’s no back-and-forth with the foreign government, no treaty signed, no deal cut. A U.S. tariff is a policy decision made here at home. That’s because the foreign government doesn’t pay the tariff. It’s not like we send them a bill and they write us a check.

So who pays it? U.S.-based importers. These are the companies or distributors who bring goods into the country. When a tariff is placed on a product, they’re the ones responsible for paying that extra cost. And in nearly every case, that cost doesn’t stop with them—it gets passed along to someone else.

Which brings us to the everyday reality: consumers end up paying more.

When the price of an imported item goes up, whether it’s clothing, electronics, or auto parts, that price hike almost always lands in the lap of the person buying it. That’s you. That’s me. That’s every American shopping at a store or online. Tariffs aren’t invisible—they just hide inside the final price.

Now, it’s worth noting that in some rare cases, foreign companies may choose to absorb part of the tariff cost themselves. They might lower their prices to keep U.S. buyers interested. This usually happens in highly competitive markets, where losing business could hurt more than lowering profit margins. But that kind of price-cutting is the exception, not the rule. Most of the time, U.S. importers raise their prices to protect their own margins—and consumers carry the load.

This is why the idea that tariffs are “hurting China” or “punishing foreign governments” is a little off the mark. Governments aren’t writing checks to the U.S. Treasury. Sure, exporters in those countries might feel the sting if their sales drop. But the governments themselves aren’t paying a dime. Any economic pain they feel is indirect—through lost business or economic ripple effects—not because they’re actually footing the bill.

That’s a pretty important distinction, especially when the political messaging often suggests otherwise.

In contrast, trade negotiations are a different tool altogether. When countries sit down to negotiate trade terms, the goal is usually to find a way to do more business together. These agreements tend to focus on reducing tariffs, streamlining regulations, or opening up specific industries. Historically, wealthier countries have used trade negotiations to create incentives for developing countries to participate in global markets. At the same time, consumers in those wealthier countries benefit by gaining access to cheaper goods.

So it’s a two-way street: one side gets access, the other gets affordability.

Everybody wins—at least on paper.

That’s not how tariffs work. Tariffs are a lever, not a handshake. They’re designed to change behavior through pricing pressure. They’re a way to say, “If you want to sell here, it’s going to cost more.” That can be effective in some cases. It can also backfire. But either way, it’s not a diplomatic move—it’s a financial one.

And to be clear, I’m not arguing that tariffs are good or bad. They’re just a tool. Like any tool, they have a purpose. Sometimes they’re used strategically, and sometimes they’re used politically. Sometimes they protect domestic industries, and sometimes they make life more expensive for the people buying groceries.

The important thing is to understand what they are—and what they’re not.

They’re not a direct punishment to a foreign government.

They’re not paid by someone overseas.

And they’re not cost-free for the people at home.

They’re a tax. A tax that hides in plain sight.

And like all taxes, we should ask: who’s paying it? And who’s actually feeling it?