“It’s the most beautiful word in the dictionary. You have a lot of words that are damn nice like love. But I think it’s more beautiful than love. The word tariff.” That was then candidate Donald Trump on the campaign trail in October 2024 at a roundtable with business leaders. Trump’s love of Tariffs stems from William McKinley who in 1897 signed the Dingley Tariff Act, increasing average duties on imports to record highs. During McKinley’s presidency, America stood at the dawn of its economic rise, a period marked by a booming industrial power—an era Trump admires for the idea of American dominance in global trade.
However, there is one central drawback to this idea. President McKinley, who had long championed tariffs, signaled a shift toward freer trade in his final days as president before his assassination, stating “What we produce beyond our domestic consumption must have a vent abroad. The excess must be relieved through a foreign outlet, and we should sell everywhere we can, and buy wherever the buying will enlarge our sales and productions and thereby make a greater demand for home labour.”
So, what exactly are these economic instruments that President Trump loves and why might they not work as well as he thinks?
Unlike the 1890s, the world today is more interconnected than ever before, with global supply chains making foreign goods widely available and sought after by consumers.
Take, for instance, ketchup chips. An American grocery store notices this popular Canadian snack trending online and decides to import it at $3.50 CAD per bag ($2.42 USD). After adding a 13.5% markup, the retail price becomes $2.75 USD. Meanwhile, the store already sells an American-made version of ketchup chips for a retail price of $3.00 USD.
U.S. consumers quickly notice the lower price of the Canadian chips and start buying them, leading to reduced sales of the American-made product. In response, the U.S. government intervenes by imposing a 9.1% tariff on the imported Canadian chips, increasing their wholesale price from $2.42 USD to $3.00 USD before any markup.
With the store’s 13.5% markup, the new retail price of the Canadian chips becomes $3.41 USD. Consumers, now facing a higher price for the Canadian product, switch back to buying the American version. Over time this can force the Canadian Ketchup Chips out of the US market.
That 9.1% tax is the tariff. While this is a baseline version of tariffs, the main principle is that they are designed to protect American businesses by making foreign goods less competitive; however, they ultimately raise costs for consumers. There are a multitude of different reasons for tariffs beyond this main principle, including national security concerns, retaliation against unfair trade practices, revenue generation, and geopolitical strategy.
For instance, tariffs can be used as leverage in trade negotiations, discouraging dumping—where foreign companies sell products below market value to drive out competition—or protecting strategic industries such as steel and semiconductors to maintain domestic production capabilities. In some cases, tariffs serve as a response to currency manipulation or labor rights violations, aiming to level the playing field between countries with vastly different regulations.
In this scenario, American consumers who enjoyed the Canadian product now face higher prices or limited choices. The increased cost is essentially passed down to the consumer, which is a common side effect of tariff policies. While tariffs can shield domestic industries in the short term, they often create ripple effects that reshape market dynamics, influencing everything from job creation to inflation and even straining diplomatic relations between trading partners.
Tariffs are complex, involving various economic and political factors, as well as government support and regulatory considerations, making them challenging to navigate. The good news is that you do not have to tackle it alone. Daisy Consulting Group has been helping businesses build trust and authentic connections for over 20 years.
Our team specializes in developing the ideal plan to engage your target audience and inspire loyalty. If you’re ready to enhance your brand, contact us for a consultation.