Trade · Employment · Globalisation
We're told that tariffs defend jobs against foreign competition. The reality: every cent of those taxes comes out of your pocket — not the foreign seller's. And the jobs "saved" often cost far more than it would have taken to retrain those workers into something with a future.
There's an idea politicians love to sell: "We'll tax foreign goods — the foreigners pay." That's false. A 25% tariff on steel doesn't come out of the steelmaker's pocket in Shanghai. It comes out of the factory that buys that steel in France — and ultimately out of yours, when you buy the car, fridge or bike made with it.
The foreign exporter may slightly lower their export price to stay competitive. But in practice, they absorb a tiny fraction. The bulk of the tariff — up to 100% according to studies — is paid by companies and consumers in the taxing country. The New York Fed confirmed this in 2019 on Trump's tariffs: practically all the cost fell on Americans.
Protectionism always has a good story: the thousands of workers protection kept in their jobs. What you're not told is what each of those jobs cost — paid as a forced surcharge on every affected product, by every buyer in the country. The figure is consistently several times the annual salary of the worker supposedly being defended.
And that's only half the picture. Every time an industry is protected, the sectors that buy its products see their costs rise. Dearer steel → dearer cars and machines → fewer orders → job cuts. For every job saved in steel, several dozen quietly disappear in car factories, shipyards, and engineering workshops.
Singapore, the Netherlands, Switzerland, Germany: among the world's most open economies and among the richest. This is not a coincidence. When a country lets foreign goods in freely, its companies access the cheapest materials in the world. Its buyers pay less. And its industries, forced to compete, innovate rather than living on life support.
Protectionists often cite South Korea in the 1960s-80s: a country that first protected its industries before opening up. That's true — but incomplete. Those protections were temporary, targeted, and tied to performance requirements: protected companies had to prove they were becoming competitive or they lost their protection. That's not the model of the Lorraine steel industry or sugar beet subsidised for 40 years.
The protectionist trap: every country has a reason to protect itself, whether the other side does or not. If they're open, you gain by closing. If they're closed, you want to defend yourself. Result: everyone closes — and everyone is poorer. This isn't abstract theory. It's what happened in 1930.
In June 1930, the United States passed the Smoot-Hawley Act: massive tariffs on 20,000 goods. Europe responded. Within two years, world trade collapsed by 66%. Industrial production plunged everywhere. Unemployment exploded across industrialised countries. Each national "defensive" measure made everyone more vulnerable — not stronger.
Four arguments you hear in every free-trade debate. Click to see what each one actually reveals.
It shows saved jobs and preserved factories. It hides the jobs destroyed downstream, the buyers made poorer, and the industries that never had to modernise — and that decline anyway, ten years later, having cost ten times more. Free trade doesn't solve everything. But closing borders solves nothing — it only delays pain while amplifying it. And it's always those with the least money who pay the most for protected products.