From the editors:
Today, we delve into the intricate world of tariffs with two insightful pieces across our Liberty Fund platforms. David Hebert, a contributor to EconLog, has penned a thought-provoking article on the implications of America’s increasingly protectionist trade strategies over on our sister site, Law and Liberty. This work serves as an excellent companion to Jon Murphy’s EconLog post titled, “No Manufacturing Jolt from Tariffs.”
In Hebert’s article:
Who Truly Bears the Cost of Tariffs?
Hebert argues that there is a significant misunderstanding surrounding the distinction between the “legal incidence” and the “economic incidence” of tariffs. Legally, tariffs are taxes imposed on imports, meaning that American importers are the ones who directly remit payments to Customs and Border Protection. However, this legal responsibility does not clarify who ultimately shoulders the financial burden of these tariffs.
To illustrate, consider the situation with property taxes: when these taxes rise, landlords may write the checks, but the reality is that the economic impact reverberates through the rental market. Landlords, who are undoubtedly not operating as altruistic entities, typically pass these costs onto tenants through increased rents, reduced maintenance, or fewer amenities. Thus, while the legal obligation lies with the landlord, the economic fallout is disproportionately felt by renters, particularly young Americans grappling with soaring housing costs.
Tariffs function similarly. Although U.S. Customs and Border Protection bills American importers, the economic repercussions are diffused among consumers, importers, and foreign exporters, influenced by the specifics of various markets.
Explore Hebert’s full essay here, and check out Jon Murphy’s EconLog post here.
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