The Economic Impact of Tariffs: Winners and Losers
Key Takeaways
Tariffs raise prices for consumers by making imported goods more expensive, particularly in sectors like food, clothing, and vehicles.
Domestic producers in certain industries benefit from tariffs, as they face less foreign competition and can charge higher prices.
Low-income families bear the brunt of higher prices, with tariffs acting as a regressive tax that disproportionately affects their purchasing power.
While some sectors gain, others, including construction and agriculture, suffer significant losses due to higher input costs and export restrictions.
Businesses can adapt to tariffs by diversifying supply chains, optimizing inventory, and communicating transparently with customers to manage cost increases.
The economic impact of tariffs is far-reaching, affecting not only international trade relations but also domestic markets and consumers. Tariffs, which are taxes imposed on imported goods, aim to protect local industries by making foreign products more expensive.
However, while tariffs benefit certain domestic producers and industries, they also lead to significant price hikes for consumers, particularly in sectors where imports dominate.
This article explores the winners and losers of tariffs, examining how they reshape industries, global supply chains, and the broader economy. Understanding the complex dynamics of tariffs can help both businesses and consumers navigate the evolving economic landscape.
What Are Tariffs and How Do They Work?
Tariffs are taxes on imported goods that raise prices for consumers while protecting domestic industries. Understanding their mechanics is essential to grasping their economic impact.
What Are Tariffs and Why Are They Imposed?
Tariffs are taxes levied on imported goods. Despite the common misconception, domestic consumers pay these costs, not exporting countries. Governments impose them primarily to shield domestic industries from foreign competition by making imports more expensive than locally produced alternatives.
Two types exist: specific tariffs (fixed dollar amounts per unit, like $15 per pair of shoes) and ad valorem tariffs (percentage-based, like 15% on automobile value). Other trade barriers include quotas, licensing requirements, and product standardization rules.
How Do Tariffs Affect Domestic and Global Markets?
Tariffs raise import prices, reducing competitive pressure on domestic producers. This allows local manufacturers to maintain higher prices while encouraging increased domestic production. The result: fewer imports, more domestic output, and elevated consumer prices across affected markets.
How Are Tariffs Calculated and Applied?
Current tariff rates vary dramatically by country. The 2025 structure includes a 10% baseline on most nations, with significant variations: China faces 57.6% (negotiated down from 145%), Brazil 50% on products like coffee, India 50%, Vietnam 46%, Canada 35% on non-USMCA goods, and Mexico 25% with agricultural exemptions.
The average effective tariff rate hit 18.2% in September 2025—the highest since 1934. At April's peak, rates reached 28%, a level unseen since 1901. This represents a massive shift from the pre-2025 rate of just 2.4%.
Who Are the Winners of Tariffs?
Tariffs create clear winners in protected industries, though gains remain concentrated and modest compared to broader economic costs.
How Do Domestic Producers Benefit from Tariffs?
Higher import prices eliminate foreign competition, allowing domestic producers to charge more without losing market share. Long-run manufacturing output expands 2.0% under current tariffs, with non-advanced durable manufacturing growing 3.8% and nondurable manufacturing up 1.1%. Governments also collect tariff revenue, adding to fiscal coffers.
Which Industries Gain the Most from Protectionist Policies?
Non-advanced durable goods manufacturing leads with 3.8% expansion. Steel and aluminum producers benefit directly from 25% material tariffs. Some agricultural sectors gain where domestic substitution is viable—Californian avocados replacing Mexican imports, domestic cheese varieties competing with European imports, and American wine and beer capturing market share from foreign brands.
How Do Consumers in Certain Sectors Benefit from Tariffs?
Workers in protected manufacturing sectors may see short-term employment gains as production expands. Some agricultural workers benefit from increased domestic farming activity. However, consumer benefits remain largely theoretical—most households face higher prices that outweigh any indirect employment gains. The protection creates jobs in narrow sectors while raising costs across the entire economy.
Who Are the Losers of Tariffs?
Tariffs impose costs far exceeding their benefits, hitting consumers, exporters, and numerous industries with price increases and lost markets.
How Do Consumers Bear the Brunt of Higher Prices?
Consumers pay tariffs directly through higher prices. The 2025 tariffs raised overall price levels by 1.8 in % short term, with effects passing through to consumer prices within two months. Food prices jumped 3.4% initially, stabilizing 2.9% higher long-term. Shoes spiked 39% short-term (18% long-run), apparel 37% (17% long-run), and motor vehicles 12%.
Average households lose $2,400 annually in purchasing power short-term, settling at $2,000-2,100 long-term. Tariffs function as regressive taxation—low-income families bear burdens 3x higher as a percentage of income versus wealthy households. The bottom decile loses 0.6% of income compared to 0.2% for top earners. Big-box store purchases cost 14% more ($551/year increase), while 84% of Americans report grocery spending concerns.
Food hits hardest where imports dominate. Coffee prices rose 21% year-over-year, with 50% tariffs on Brazilian beans—the U.S. imports nearly 100% of coffee with no domestic alternative. Seafood (85% imported) faces 10-15% increases. Fresh produce jumps 6.9% short-term, beef 11.6%, and chocolate 8-12%. Consumers respond by shopping more frequently for smaller purchases, switching to store brands, reducing restaurant visits, and increasingly using buy-now-pay-later for groceries.
Which Industries Suffer the Most from Tariffs?
Construction output contracts 3.5-3.6%, crowded out by protected sectors. Agriculture declines 0.8-0.9% despite protection, while advanced manufacturing drops 2.8%—tariffs on imported components outweigh benefits. Mining and extraction contract 1.3%.
Restaurants face severe pressure from ingredient tariffs. EU wine and cheese tariffs squeeze independent establishments, while fast food chains absorb higher beef costs from Australian tariffs. McDonald's hamburger costs reflect imported lean beef trimming prices, demonstrating how tariffs ripple through supply chains.
How Do Developing Countries and Exporters Lose Due to Tariffs?
U.S. agricultural exporters lost $27 billion between mid-2018 and 2019 during the previous trade war. Soybean farmers bore $9.4 billion in annualized losses as China's retaliatory tariffs slashed U.S. market share from 62% to 18%. Farm bankruptcies surged 55%, concentrated in the Midwest. The government authorized $61 billion in bailouts then, $10 billion for 2025.
Export losses continue mounting. Agricultural exports to China fell 39% between June 2024 and June 2025, with overall soybean exports down 23% year-over-year. Regional impacts are severe: Iowa loses $1.5-2.0 billion annually, Illinois $1.4-1.8 billion, and Kansas $1.0-1.3 billion. The Midwest absorbs approximately 70% of the national agricultural tariff damage.
Retaliatory tariffs compound losses. China imposed 85% tariffs on U.S. dairy and 100%+ on pork. Canada and the EU each levied $28 billion in counter-tariffs, with whiskey and bourbon specifically targeted. These markets, once lost, may never fully return.
What Are the Long-Term Effects of Tariffs on the Economy?
Tariffs shrink the overall economy while disrupting trade relationships and triggering cycles of retaliation that damage long-term competitiveness.
Do Tariffs Lead to Economic Growth or Decline?
Tariffs cause economic decline. GDP growth falls 0.5 percentage points in 2025-2026, with the economy shrinking 0.4-0.6% long-term, equivalent to $115-180 billion in annual lost output. The unemployment rate rises 0.4 percentage points by the end of 2025 and 0.7 points by the end of 2026, eliminating approximately 500,000 jobs.
Agricultural employment dropped 6.5% (155,000 workers) between March and July 2025, while 1.2 million foreign-born workers exited the labor force. Business investment suffers as policy volatility creates planning paralysis—companies hesitate on long-term commitments while farm equipment capital expenditures surge 12-18% due to tariffs on machinery components.
How Do Tariffs Affect International Trade Agreements?
Trade relationships deteriorate under tariff pressure. The U.S.-China trade deficit remains $295 billion in 2024—still the largest with any country despite years of tariffs. Chinese goods comprise 13.5% of U.S. imports, while China holds $760 billion in U.S. Treasury bonds. Combined, the economies represent 43% of global GDP and 48% of global manufacturing output.
USMCA provides limited relief—63% of Mexican agricultural imports receive exemptions. Mexico ($30.3 billion in 2024) and Canada ($28.4 billion) remain the top agricultural trade partners. However, export markets lost may never return. Brazil captured the U.S. soybean market share in China, permanently damaging trust in American reliability as a supplier.
Can Tariffs Lead to Retaliatory Measures and Trade Wars?
Tariffs inevitably trigger retaliation. The U.S. imposed tariffs on $350 billion in Chinese imports; China retaliated on $100 billion in U.S. exports. The Biden administration retained $360 billion in Trump-era tariffs, with threats reaching 145% on Chinese goods and Beijing responding with 125% counter-tariffs.
Research by Autor, Dorn, and Hanson shows the "China Shock" caused more disruption than trade with other nations due to import speed, China's massive low-wage workforce, and the breadth of affected industries. Political polarization increased in the hardest-hit regions, demonstrating how trade wars generate lasting economic and social damage beyond immediate price effects.
How Do Tariffs Impact Global Supply Chains?
Tariffs force costly supply chain restructuring, disrupting established relationships and requiring years of adaptation with uncertain outcomes.
How Are Global Supply Chains Reshaped by Tariffs?
Companies pursue nearshoring to Mexico and friendshoring to alternative suppliers like Vietnam and Bangladesh. Chinese manufacturers establish facilities in third countries to circumvent tariffs. These structural changes require years to implement fully, permanently altering import relationships and agricultural trade patterns.
Immediate disruptions compound long-term challenges. Ingredient sourcing becomes more complex and expensive, disrupting supplier relationships built over decades. Inventory management grows unpredictable as policy uncertainty makes planning nearly impossible.
What Are the Costs of Relocating Production to Avoid Tariffs?
Relocation costs are substantial. Greenhouse, hydroponic, and vertical farming investments address import dependency but require extended capacity building with challenging ROI timelines. New suppliers introduce quality and consistency issues, demanding rigorous compliance and sustainability vetting.
Logistics costs escalate across the board. Container shipping jumped 12% in 2025, while border inspection delays lengthen transit times. Warehouse capacity constraints and equipment shortages (trucks, agricultural machinery) stress distribution networks. Companies need customs brokers and trade experts to optimize tariff classifications—expertise that wasn't necessary before.
How Do Companies Adapt to Changing Tariff Regulations?
Businesses front-load inventory before tariff implementation, then face drawdowns and forecasting challenges. The risk of simultaneous shortages and obsolete inventory paralyzes planning. Companies evaluate alternative sourcing constantly while phasing price increases gradually to avoid shocking customers.
Technology offers partial solutions. Precision agriculture optimizes fertilizer use through satellite monitoring and AI to offset input cost spikes. Food processors reformulate products to reduce expensive ingredients and redesign packaging to minimize tariff exposure. Supply chain visibility platforms and blockchain documentation help manage compliance complexity—but none eliminate the fundamental inefficiency tariffs create.
Are Tariffs a Sustainable Economic Strategy?
Evidence shows tariffs fail to achieve stated goals while creating cascading problems that worsen over time, raising questions about their viability as policy.
Do Tariffs Solve Trade Imbalances or Create New Problems?
Tariffs don't fix trade deficits. The U.S.-China deficit remains $295 billion in 2024 despite years of aggressive tariffs. Studies confirm U.S. companies and consumers bear costs, not Chinese exporters—the opposite of stated intentions.
Economic trade-offs reveal the strategy's futility. Modest gains in protected manufacturing are overwhelmed by losses in construction, agriculture, and consumer-facing industries. Domestic production expansion in some sectors is offset by larger contractions elsewhere, shrinking the overall economy rather than strengthening it.
Can Tariffs Be Reduced or Eliminated for Long-Term Economic Growth?
Negotiations offer partial relief. Some country-specific tariffs received 90-day delays, while EU rates dropped from the threatened 30% to 15% and China from 145% to 30%. Potash fertilizer fell from 25% to 10%, and pharmaceutical ingredients gained exemptions.
However, damage compounds with time. Supply chains restructure permanently around tariff realities—the longer rates remain elevated, the more permanent the harm to export relationships. The 2025 subsidy authorization of $10 billion pales against the 2018-2019 bailout total of $61 billion, raising doubts whether government support matches actual losses.
What Alternatives to Tariffs Can Governments Use to Protect Domestic Industries?
Multiple policy tools exist without tariffs' broad economic damage. Targeted exemptions for critical inputs—fertilizers, essential machinery—reduce costs without abandoning protection entirely. Direct farmer support programs, debt relief, and crop loan facilitation address industry stress without raising consumer prices.
Trade negotiations prioritizing market access prove more effective than unilateral tariffs. Rather than imposing barriers that invite retaliation, diplomatic agreements can secure favorable terms while maintaining trading relationships. The tools exist; the question is the political will to deploy them.
What Are the Broader Socioeconomic Effects of Tariffs?
Tariffs extend beyond price increases to reshape food security, environmental outcomes, and labor markets in ways that amplify inequality and stress vulnerable populations.
How Do Tariffs Impact Low-Income Families?
Low-income families bear disproportionate burdens. The poorest decile loses $1,300 annually (0.6% of income) compared to the wealthiest losing $1,049 (0.2% of income)—a burden three times higher proportionally. The second-poorest decile loses $1,500 while middle-income households lose $2,400.
Food insecurity worsens as grocery costs rise. SNAP (food stamps) faces cuts threatening 4 million beneficiaries, while food banks report surging demand. Nutrition quality declines as families substitute cheaper, less healthy options. Since food represents a larger budget share for low-income households, tariff-driven price increases force impossible choices between adequate nutrition and other necessities.
What Is the Environmental Impact of Tariffs on Production and Consumption?
Tariffs accelerate environmental damage through market distortions. Brazil aggressively expands soybean production to capture U.S. market share lost to Chinese retaliatory tariffs, driving Amazon deforestation to alarming levels.
Climate disruptions compound tariff pressures. Droughts in the U.S. Great Plains raise feed costs while Brazil and Vietnam face heat and drought, reducing coffee yields. Poor sugar harvests in India and Thailand, hurricane damage across the U.S. Southeast, and growing region migration complicate supply chains already stressed by trade barriers. Water scarcity constrains agricultural productivity precisely when tariffs demand increased domestic production. The combination creates a spiral where trade policy and environmental crisis reinforce each other.
How Do Tariffs Affect Employment and Labor Markets?
Agricultural labor faces crisis-level disruption. 1.2 million foreign-born workers exited the labor force in 2025, with agricultural employment down 6.5% (155,000 workers) between March and July. Immigration enforcement raids scare remaining workers away, leaving crops unharvested in California and other states. Labor costs rise for remaining workers while production declines in labor-intensive crops. Processing plants operate below capacity, creating distribution bottlenecks.
Regional vulnerabilities concentrate damage. The Midwest (Iowa, Illinois, Kansas) suffers most as export-dependent grain and livestock producers lose markets. Great Plains wheat and cattle producers, California specialty crop exporters, and Southeast cotton and poultry producers all face severe stress. Border states like Texas (40% of imports from Mexico) see both supply chain disruption and labor shortages.
Farm financial stress intensifies across these regions. Debt levels climb as farmers delay equipment purchases, defer maintenance, and struggle with succession planning. Credit terms tighten as lenders reassess risk. Small and mid-sized operations, lacking the capital reserves of large agribusiness, face the greatest pressure—and the highest failure rates.
How Can We Adapt to the Economic Reality of Tariffs?
Tariffs create unavoidable economic pressure, but strategic adjustments can help consumers and businesses minimize damage while navigating ongoing uncertainty.
What Can Consumers Do to Mitigate the Impact of Tariffs?
Households can reduce tariff impact through practical shifts. Meal planning and batch cooking stretch budgets further. Seasonal produce, generic brands, and warehouse club memberships cut costs. Substituting beans and lentils for beef, choosing frozen over fresh vegetables, buying grains in bulk, and cooking at home instead of dining out all help offset price increases. Loyalty programs, coupons, and reduced food waste add marginal savings that accumulate.
Substitution has hard limits. Coffee has no domestic alternative at scale. Winter produce requires imports or massive greenhouse expansion. Chocolate and cocoa cannot be grown commercially in the continental U.S. Quality and taste differences constrain many switches, while consumer preferences often remain brand-specific. Adaptation helps but cannot fully eliminate tariff costs.
How Can Businesses Navigate the Economic Shifts Caused by Tariffs?
Importers and retailers employ multiple strategies. Advanced purchasing and inventory building smooth price shocks. Alternative sourcing evaluation diversifies supply chains. Food service businesses engineer menus toward lower-cost items, implement portion control, and reduce waste. Local sourcing works where economically viable. Dynamic pricing and transparency with customers about cost pressures maintain trust while managing margins.
Farmers and producers face different challenges. Input purchase timing optimization, crop selection adjustments, and cooperative buying achieve economies of scale. Some explore new export markets in Asia and Latin America while using futures markets for risk management. However, reality is harsh—some food service establishments consider closure rather than continuing to absorb losses.
Sector-wide impacts show the pressure. Typical supermarkets carry 40,000 affected products with prices averaging 2.6-3.0% higher. Retail margins compress as some businesses absorb costs short term, hoping for policy changes. Smaller processors with less negotiating power suffer most. Adaptation buys time but doesn't solve the fundamental inefficiency tariffs impose on the entire economy.
Take Action to Navigate the Economic Challenges of Tariffs
Tariffs are reshaping the global economy, with clear winners in specific sectors but far-reaching consequences for consumers, industries, and international trade relations. While domestic producers in certain industries may benefit from reduced competition, the overall impact of tariffs includes rising consumer prices, disruptions to global supply chains, and long-term economic challenges. As we adapt to this new reality, businesses and consumers must adopt strategies to mitigate the effects of tariff-driven price hikes.
At SJ Food Brokers, we understand the challenges posed by tariffs and are committed to helping you navigate these turbulent times. Whether you need reliable food sourcing, supply chain solutions, or guidance on managing the impacts of tariffs, we are here to help.
Contact Scott at 954-815-4862 or Jamie at 303-547-6360 today to discuss how we can assist you in adapting to these economic shifts and ensuring your business thrives amid changing trade policies. Let us guide you through the complexities of the current market and help you find cost-effective solutions!
