It’s an exciting time for those of us who watch economic systems. Across the globe, real-world experiments are challenging long-held ideas. In Argentina, Javier Milei is slashing government spending, which will cut imports and bring down inflation. However, while starting a nosedive is easy, pulling up before crashing will be the real test. Meanwhile, Japan is still puzzling over why it can’t raise inflation or interest rates to some mythical “neutral rate.” Given Japan’s history of clinging to tradition, it may take generations—perhaps even centuries—to abandon this outmoded idea.

Now, we turn to President Trump’s latest tariffs. There’s been a lot of noise about them—much of it nonsense. But now they’re in place, and we’ll see what really happens.

Buckle up. It’s going to be a fun ride.

Introduction

Trump’s new tariffs have sparked outrage from economists, policymakers, and commentators. The standard argument is that they are protectionist, inflationary, and bad for global trade. But there’s an irony here: the European Union has had its own Common Customs Tariff (CCT) for years, yet it rarely gets the same criticism. As Brexit reaches its five-year mark, it’s worth examining the double standards in how tariffs are discussed—especially who they benefit and who they hurt.

1. The Double Standards in Tariff Criticism

Trump has slapped a 25% tariff on imports from Canada and Mexico and a 10% tariff on Chinese goods, citing concerns about illegal immigration and drug trafficking. Critics say these measures threaten free trade and could spark trade wars.

However, the EU’s CCT—which imposes standard tariffs on imports into the bloc to protect its industries—rarely faces the same backlash. Why are Trump’s tariffs considered reckless while the EU’s are just part of the system? Is it political bias? Or a failure to understand how tariffs actually work?

2. Who Pays for Tariffs?

In theory, tariffs make imports more expensive, meaning consumers and businesses in the importing country foot the bill. Yet, when it comes to Brexit, we often hear that the UK “pays” tariffs and other non-tariff barriers on exports to the EU—when, in reality, it will be EU consumers who end up footing the bill.

This inconsistency is telling. When Trump imposes tariffs, the media focuses on how they will raise costs for American consumers. However, with Brexit, the focus shifts to how UK exporters suffer while ignoring the cost to EU consumers. This selective storytelling distorts the accurate picture of how tariffs work.

3. Trump’s Strategy: The Method in the Madness

Trump’s thinking isn’t particularly sophisticated—he sees the US buying more from Canada than Canada buys from the US and views that as a loss. However, there’s more to it than just trade deficits.

The US Congress is bound by ‘Pay-For’ and debt ceiling rules constraining deficit spending. In an ideal world, Trump would have these restrictions scrapped, but as long as they remain, he is looking for ways to carve out space for tax cuts or domestic spending. Under the current system, some of the foreign trade surplus with the US translates into non-resident purchases of US Treasuries. By squeezing that surplus down, he reduces the amount flowing into Treasuries from non-residents while increasing purchases by US residents—assuming the overall federal deficit stays the same—effectively reducing fiscal space for domestic policies, not expanding it.

While it’s an indirect way to reallocate financial resources away from foreign creditors, it likely dampens total savings desires. Likely, it adds to demand pressures, a shift that could affect inflation and interest rates. Yet, this angle is rarely discussed. Instead, the focus remains on whether tariffs ‘work’ in a narrow trade-balancing sense rather than on their deeper fiscal and monetary consequences.

4. The Distributional Effects of Trump’s Tariffs

There’s little doubt that Trump’s tariffs will raise the price of certain luxury imports in the US, but almost no one asks what happens on the income side of the equation. If we split American workers into two broad groups—Trump supporters and non-supporters—his goal is simple: ensure that his supporters gain more than they lose, even if it comes at the expense of his detractors.

Trump could achieve this in various ways. If tariffs make imports more expensive, Congress can offset that by boosting the incomes of Trump’s base. It could come through tax breaks, subsidies, or policies favouring capital-intensive industries over consumer-focused ones. If the gains are concentrated in key sectors—manufacturing, energy, defence—then the overall effect is a redistribution of wealth rather than just a simple price increase. Why is no one talking about this? Perhaps because the discussion around tariffs remains stuck in simplistic ‘good vs. bad’ narratives rather than examining their real-world political and economic impact.

5. The Pitfalls of Retaliatory Tariffs

In response to Trump’s tariffs, Canada has floated the idea of retaliatory levies on US goods. While this might seem like a firm response, it risks backfiring by raising Canadian consumers’ prices and reducing living standards. Unlike Trump, who appears to have a clear set of people he wants to benefit and a set he wants to stand the cost, Canada’s retaliation lacks strategic targeting—meaning the economic pain will likely fall on those least able to afford it.

Instead of reflexively imposing counter-tariffs, a more effective strategy would be to neutralise price increases. If Canada prevented price hikes on affected imports in CAD terms, the currency exchange rate would return the cost to suppliers. US exporters would then be forced to lower their USD receipts or lose sales. But such nuanced responses rarely make it into the political debate, which tends to favour dramatic gestures over sound economics.

6. The Politics Behind Tariff Perception

The EU tariff regime is treated as a given, while Trump’s tariffs are seen as a shock to the system. But why?

Part of the reason is political bias. The backlash against Trump’s tariffs often seems driven more by opposition to Trump himself than by a consistent economic argument. The media and policy elite view EU protectionism as a sophisticated and stabilising force while portraying Trump’s tariffs as reckless and populist. But in practical terms, both are tools used to favour domestic industries and manipulate trade flows.

Brexit offers another example of this double standard. The EU’s tariffs on UK goods are framed as a deserved consequence of leaving the single market, a form of economic gravity that Britain must accept. Yet, the UK’s ability to unilaterally drop tariffs on imports—potentially lowering costs for consumers and businesses—is brushed off as insignificant. The assumption appears to be that tariff regimes imposed by large, established players who believe they are in the right, like the EU, are justified. At the same time, those set by disruptive actors like Trump or post-Brexit Britain must be reckless.

This reflects a broader political reality: power determines perception. With its internal market and regulatory clout, the EU has embedded its anti-free-trade tariff system into global trade norms. Trump’s tariffs, by contrast, challenge the status quo, making them an easy target for criticism. Whether a tariff is seen as sensible or destructive often has less to do with economics and more with who implements it.

7. Rethinking the Tariff Debate

We need a fairer, more precise discussion on tariffs. That means holding the EU, the US, and other major economies to the same standard. It also means examining who actually bears the cost of tariffs rather than repeating well-worn narratives.

Brexit has provided a real-world lesson in how tariffs function, and Trump’s changes will provide another. Instead of relying on political spin or theoretical ‘counterfactuals’ that are little more than wishful thinking, we should take this opportunity to rethink our approach to trade policy—one based on facts rather than assumptions.

Conclusion

Criticism of Trump’s tariffs is often inconsistent, particularly when compared to the EU’s CCT and the trade policies related to Brexit. If tariffs are harmful, why do we accept them in some instances but not others? We need to confront this double standard if we are to engage in a rational debate about trade.

As global trade shifts, it’s time to move beyond the usual talking points and ask more challenging questions about how tariffs work and who they truly serve.

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