Tariffs are essentially a sales tax. It so happens that these sales taxes apply only to goods supplied to the US by other countries, but that does not alter their fundamental nature; a sales tax is a sales tax.
When you apply a sales tax to any product, its price rises. It may be that the supplier is able to absorb a portion of the new tax by reducing his profit margin, thus avoiding the need to pass the whole tax on to the consumer, but it will be a rarity for the price to the consumer not to rise at all. If the consumer goes on buying a product that has been subjected to a sales tax, then the consumer spends more on that product. In other words, price rises resulting from tariffs are paid by those who continue to consume imported goods.
These continuing consumers, therefore, must divert a portion of their spending that would have gone on other products to paying the higher price of the imported product. If that alternative expenditure would have been on domestic products, then the expenditure of those consumers on domestic products will fall, and the incomes of those who produce these domestic products will necessarily also fall.
Of course, some consumers will be deterred by the higher price from purchasing the imported good. The volume of imports will probably fall. This means the foreign suppliers of imported goods will have less income with which to purchase US goods and American exports will accordingly fall, along with the income of American workers who produce those exports.
There remains a question of whether domestic production will rise to replace the reduced imports. Domestic production that was able to compete at the previous import price would presumably already be doing so. Domestic production that is now able to compete at the new import price, but was not able to compete at the old import price, is probably going to avail itself of the diverted demand, but, by definition, only at a price that is higher than the old import price. So again, it is the consumer who pays, only he pays extra to a domestic producer rather than paying a tax to his government.
It has long been an accepted economic principle that more trade is generally good, in the sense of raising incomes all round, and that less trade is bad. Trade wars impoverish everybody in the world.
Protectionism may be justified when a foreign country’s government is breaking WTO rules by unfairly subsidising its exports, but if the foreign country simply happens to be better at producing a particular product than you are, then it makes sense to divert the domestic resources currently deployed to producing inefficiently into producing something else efficiently. That way trade will continue to increase and everybody benefits.
I acknowledge that the above outline may be seen as Economics 101 by those who know something about economics. I also acknowledge that I have glossed over problems of transition and restructuring.
However, this explanation was inspired by a vox pop interview in the US, in which a gentleman firmly asserted that tariffs on Chinese goods would be paid by the Chinese government. Oh, yes. And the only thing stopping pigs flying in the USA is that porcine aviation is prohibited by US law.
