Tariffs seem to be taking over every aspect of the global economy lately, so let’s look back at the history of tariffs and what their original purposes were. Simply put, a tariff is a tax or duty paid on imported goods, collected by the government of the destination country. Initially it is the importing company that is responsible for payment of the duties. But they typically pass that cost on to the consumers through increased prices on affected goods.

Tariffs in the United States date back to the creation of the U.S. Customs Service. Much like with his involvement in the creation of the Customs Service, Alexander Hamilton saw a need for the young country to bring in revenue to support the growing government. The Tariff Act of 1789 was passed to solve these problems. At that time, the main goals of the tariffs were to promote trade and to raise revenue. And for a while the tariffs worked as intended. The government made enough money to function successfully, and the American economy and industry began to thrive.

Over time, however, the effectiveness of tariffs has fluctuated and as America has become more self-sufficient tariffs have lost some of their appeal. Then, when the Great Depression hit, President Hoover signed the Smoot-Hawley Tariff Act to raise tariffs once again. He claimed this was to protect the American economy and jobs. Europe responded with tariffs of their own, causing a larger trade war that negatively impacted both economies.

Fast forward to today and a very similar scenario is unfolding. President Trump has long viewed tariffs as a bargaining tool and foreign countries are responding with their own tariffs on American goods. This has once again thrown the global economy into a state of limbo as tariffs are threatened, then enforced, then walked back. This constant shifting has left importers hesitant to approve shipments as they don’t know if their goods will end up being subjected to additional tariffs when they enter the country or not.

At their core, tariffs were born out of a good place. They were meant to protect the economy and jobs of the country imposing the tariffs. However, as time has gone on and as trade has evolved, the argument can be made that they’re no longer nearly as effective as they once were. As we are seeing with the most recent wave of tariffs, it tends to be the consumer that bears the brunt of the added costs.