Judging from the almost identical speeches and press reports this election year – in the effort to obscure the clear Biden-Harris responsibility for the “Bidenflation” that has wreaked so much havoc on our economy – the official talking points on the “affordability” issue feature the claim that President Trump’s new import tariffs are a major cause of high prices.
Governors J.B. Pritzker and Kathy Hochul, for example – as the Democrat bosses of two of our bluest states – are demanding that the Trump administration write checks to their states, as if the full refunds to importers of all IEEPA tariffs collected from them over the past year, as mandated by the Supreme Court, were not enough.
Pritzker and Hochul (among others) are essentially demanding a double-refund – a stimulus payment from taxpayers to taxpayers, in addition to the refunds being paid to affected importers – which would be not only unprecedented and unjustifiable, but counterproductive as well.
We can dismiss some of this as political theatre. Obviously, these governors know (or if they don’t, they must have staffers who know) that these IEEPA tariff refunds will be issued in full, regardless of politics, through the normal Customs process.
But they are grabbing hold of an issue they think – and hope – can be turned their way in the polls.
With the Trump-Vance administration being so successful in so many ways, it’s understandable that they might grasp at straws, but this may be evidence of a genuine need for education on just what share of an economy tariffs represent. It’s likely nowhere near as much as we are led to think.
From the 1980s through the early 2010s, American import duties and other tariffs totaled somewhere between $25 and $45 billion per year. Since the imposition of President Trump’s punitive tariffs on Chinese goods in his first term, and on almost all foreign goods in his second term, they have grown considerably, to about $100 billion per year not counting the IEEPA (“reciprocal” and “fentanyl”) tariffs that were added last year and which are now beginning to be refunded. Even counting the now-rejected IEEPA tariffs, the total collection of duties and other tariffs was under $300 billion per year.
This of course sounds to us like an enormous number – and it is, in a vacuum.
But economics can’t be studied in a vacuum. To appreciate the impact of one item on an economy, we must compare it with other numbers.
We currently have total annual federal revenue of over $5 trillion, with an over $2 trillion annual deficit. That means that the total collection of all duties and tariffs together, even counting the huge part that SCOTUS cancelled, still total only about 4% of our $7.4 trillion federal budgeted spending for 2026.
With a nominal annual GDP of about $30 trillion, that total collection of all duties and tariffs amounts to less than one single percent of our national gross domestic product. It is the proverbial drop in a bucket.
All this, of course, is not to say that tariffs don’t matter. They certainly do. But, contrary to the popular media talking points, they are simply not such a massive hit to the economy to have been a major cause of inflation – certainly not when compared to the real causes of inflation over the past five years: the forced Covid-19 shutdowns, outrageous federal “stimulus” spending, increased energy and transportation costs due to disastrous “green” energy policy, massive bailouts to Left-favored big cities and blue states, and in general, the over-printing of federal currency.
Create “money” out of thin air, and you have inflation.
Perhaps we need to set the record straight on how tariffs are collected, or more precisely, what duties and tariffs are a percentage of.
For 40-plus years, our average import duties in the United States were just a couple percent of the value of imported goods, depending on the product in question. Some were zero percent, some two or three percent, some four or five percent; while protected industries had higher percentages, the average rate has been low.
In President Trump’s first term, we applied new punitive tariffs of 7.5% or 25% on most Chinese goods, on top of other existing duties and fees. In his second term, we started applying ten, twenty, thirty percent, and in some cases, even higher additional tariffs, on top of those basic import duties, with some products from some countries briefly exceeding 100%.
This sounds like a lot. It sounds huge.
But remember the big picture above. Even at its worst, we’re talking about less than a single percent of GDP. So let’s look at the reason for that.
When we hear the numbers cited above – a 5% tax, then a 7.5% tax, then 25% or 50% or even 100% – it sounds enormous because we imagine it to be a percentage of the products we ourselves buy when we shop. This is intentional.
The J.B. Pritzkers and Kathy Hochuls of the world are trying to make us think that without President Trump’s tariffs, our groceries, clothing, toys, tools, and everything else we buy would a quarter or even half cheaper. Oh, if only it weren’t for the tariffs, we are told, what a wonderfully affordable world it would be!
Nothing could be further from the truth.
Duties and tariffs are actually applied to the total entered value of an imported good, at the time it is imported by the importer.
That sounds like repetition, but each point is important. Duties and tariffs only apply to imported goods, and they are only applied to the value of the goods to the company that imports them, at the time of importation, before anything else is done to them in the United States.
As consumers, most of us don’t pay duties and other tariffs ourselves, directly. That means that these percentages are not applied to the price we pay at all; they are applied to some smaller price, perhaps a much smaller price.
Consider:
We buy an imported good at a retailer. For that retailer to put it on the shelf for us, he usually had to buy it from a distributor, who himself imported it from the foreign manufacturer. That means he likely paid half as much, or less, than the price we pay, because there are two middlemen, and warehouses and transportation, and brick and mortar buildings and staff, in between. So the duties and tariffs on that imported item do contribute to the price, but to a much smaller degree than they appear from the way the blue governors would imply.
The hundred-dollar imported good you purchase at a department store probably cost the first importer forty or fifty, before all the American transportation and warehousing and marketing and sales and overhead bring it into your view.
The difference is even more stark with American-made goods.
An American-made car, washing machine, refrigerator or power tool is manufactured here with a mix of foreign and domestic parts. Only the foreign parts were hit by tariffs and duties; the larger makeup of the product price goes to that American assembly line that produced the product. Tariffs play a very small role in that finished good, when we look at the big picture.
The American-made product has lots of components, each one worth a dollar or two, or a penny or two, each of which is in competition between vendors here in the USA, vendors in China, and vendors in other foreign countries – a competition that has the American manufacturer making dozens of judgment calls, as he chooses this Chinese part or that Japanese part or this American part or that Mexican part. That American manufacturer certainly notices the tariffs on all imported goods, and the sky-high tariffs on Chinese goods.
So, is all this to say that these tariffs are meaningless? Of course not. Just that they are not designed to have a big effect on the retail consumer.
These tariffs are carefully designed to affect the way that America’s manufacturers and distributors do their purchasing.
When an American company designs a product, does it choose to make that product itself, or outsource it to another American subcontractor to make? For too long, these American companies outsourced the manufacture of their products to foreign subcontractors, and in the past 30 years, especially, it’s all been going to Chinese subcontractors.
And when we do make the product ourselves, do we buy all the components locally, or do we import some, or many, of those components?
For far too long, we have imported far too many. Our American car may include imported manifolds and tires, dashboards and seats, pumps and printed circuit boards. Our American washing machine may be molded from imported steel and contain an imported pump, and motor, and hoses, and fasteners. Our American network server may be filled with Chinese electronics.
The tariffs and duties apply to all those imported components, imported raw materials, and other imported products, at the price the US importer pays his foreign vendor for them. This makes them a relatively huge cost for the manufacturer or reseller, but nowhere near as big a cost to you and me, as the retail consumer.
So why do it? Because the dirty little secret of politics is that tax policy isn’t just intended to raise revenue for the government; it’s also designed to affect human behavior.
Set our tariffs high enough, and these higher tariffs on imported goods will discourage a company from importing those components or raw materials or finished goods from the current vendor, and will either drive the company to give the business to a country other than the targeted one, or preferably, drive the company to find a local vendor – or a whole bunch of new local vendors – here in the United States.
This isn’t new; the concept of protectionism has been around for thousands of years and, when managed correctly, it does work.
We are seeing a very careful effort by the Trump Administration to use tax policy to gently (yes, gently, because bans, import quotas, or other coercion would be much more painful than this) encourage the American business sector to disentangle itself from dependency on China, and to instead spread their business over multiple alternative countries and their fellow American vendors as well.
Our own manufacturing sector has been crippled by the Chinese component being a dollar cheaper per piece than the American part, and the Chinese raw material being a dollar cheaper per pound than the American raw material. Raising tariffs on imported goods and materials can eliminate that Chinese advantage so that American suppliers will spring up again like they did in the past.
So, in conclusion: Do these new tariffs marginally increase prices? Yes, a little, though not nearly as much as the opposition implies, due to the factors detailed above.
But by spurring a wave of new American manufacturers, we are creating new jobs, new career paths, from the engineering department to the assembly line, from purchasing to sales, from R&D to quality, from facilities to customer service.
This creation of new opportunities more than makes up for the small marginal increase in some products’ pricing at the checkout line.
The real question is – do the politicians and talking heads who exaggerate the negative impact of the tariffs, and who dismiss their positives, already know all this and hide it, or do the talking heads really, truly, just not know these economic basics?
Copyright 2026 John F. Di Leo
John F. Di Leo is a Chicagoland-based international transportation and trade compliance trainer, speaker, and consultant. A President of the Ethnic American Council in the 1980s and Chairman of the Milwaukee County Republican Party in the 1990s, his book on vote fraud (The Tales of Little Pavel), his political satires on the Biden-Harris administration (Evening Soup with Basement Joe, Volumes I, II, and III), and his first nonfiction book, “Current Events and the Issues of Our Age,” are all available in either eBook or paperback, only on Amazon. His trade compliance training practice is available either in person or by webinar.
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