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Bear Breakdown is an ongoing series where university experts share clear, thoughtful insights on today鈥檚 most talked-about topics. Each article connects headline news to real-world impact, helping readers better understand what鈥檚 happening and why it matters.

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From professional economists to friends, family, neighbors and more, over the past few months, the word on everyone鈥檚 lips seems to be the same: tariffs.

A piece of economic policy once deemed so complicated and tedious  is now gracing the headlines of national publications, trending all across social media and sparking heated discussions about its pros and cons.

In the midst of all the claims, contradictions and confusion surrounding tariffs in recent months, it can be difficult to pin down concrete details and get a bigger picture of exactly what is going on.

Faculty from the University of Northern Colorado鈥檚 Economics, Finance and History programs share their expertise and shed some light on what tariffs are, how they鈥檙e being implemented and what kinds of impacts they might have.

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• A Financial Perspective

  Quotes from Chris McMahan, Ph.D., assistant professor of Economics in the College of Humanities and Social Sciences.

  • What exactly are tariffs?

    A tariff is a tax that is paid on goods that are imported into a country.

    Typically, we use tariffs to help bolster or 鈥減rotect鈥� our domestic companies who face competition from low-cost production overseas.

    Imports can put domestic companies and employees who make those same products out of business. The tariff raises costs for the foreign business, which will lead to higher prices. At those higher prices, domestic companies can stay in business.  

    Tariffs work like any other tax in terms of how they can transfer money from one group to another.

    In the case of the tariff, 颈迟鈥檚 like, 鈥渉ey, if we can raise the prices on t-shirts by $5 and sell 1 billion t-shirts in a year, we can shift $5 billion from the consumers to the American t-shirt companies and their employees to help keep the American t-shirt industry afloat.鈥�  

    That $5 billion can subsidize tens of thousands of jobs. 滨迟鈥檚 surprising to me that some people might be okay with that wealth transfer but are against raising income taxes and giving the proceeds to people in need, like the manufacturing workers who lost their jobs 鈥� it's the same principle.  

  • Who pays for tariffs?

    There are two ways we can think about that.

    One is who physically pays the tax, which, for economists, is the least important point to consider. That said, the answer is typically the importer, who is a resident or company of the importing country.   

    While that importer may pay the tax directly, what really matters is who actually ends up paying for it at the end of the day, which is the final consumer through higher prices.  

    In the simplest tariff models, if there is a $5 tariff on t-shirts, ultimately, the price of t-shirts will go up by $5. The customer pays $5 more, and the American producer takes home $5 more.

    The only other outcome is the U.S. government will collect some additional tariff revenue, but that鈥檚 a pretty small part of our government budget.  

    For instance, in 2024, the government spent $6.8 trillion and collected $81 billion in tariff revenue. In other models, the price may go up by less than $5. However, in that case, the tariff provides less production to the domestic industry.

    滨迟鈥檚 important to recognize that the tariff鈥檚 mechanism for protecting the domestic industry is through higher prices 鈥� higher prices are the goal.  

  • What kinds of impacts can tariffs have on the economy?

    The results of the basic tariff model tend to be pretty generally accepted amongst economists. Not every detail, of course, and there are more complicated models, but the common themes are prices will increase, some domestic jobs will be protected and/or created, and the government will collect some tariff revenue.   

    One other common takeaway from our tariff models is that,while there are both winners and losers from tariffs, the losers lose more than the winners win. Economists call this 鈥渄ead weight loss.鈥� While there can be some winners down the line鈥搇ike the person who owns the t-shirt company 鈥� 颈迟鈥檚 all being subsidized, and more, by the final consumer.   

    There are some potential effects of tariffs that are not part of our economic models. For instance, one aspect of the current tariffs that is difficult to model is their use as international political negotiation tactics. 滨迟鈥檚 possible that there will be political gains our models can鈥檛 predict.  

    Uncertain business conditions are a huge consideration right now as well. This idea that things can change any day, and change in major ways, is probably not good for our economy. 滨迟鈥檚 a hard place to be, as companies need to make decisions that will impact their futures while not knowing what that future is going to look like. 

    Think about the best-case scenario goal of the tariffs. We鈥檙e hoping that U.S. companies can increase production and hire more workers. But this doesn鈥檛 happen overnight. In order to increase t-shirt or automobile production, we need to build factories, which require enormous long-term investments. It will require companies to invest tens of millions of dollars when they aren鈥檛 sure of the magnitude or timeline of the tariff protection.   

    Economists don鈥檛 agree on many things, but we do tend to agree that one, trade 鈥� not just international trade 鈥� tends to be a good thing, and two, uncertainty is a bad thing. Both of these apply in the current environment.  

  • How does this most recent round of tariffs differ from how they have been implemented in the past?

    This across-the-board, wide-scale approach is broader than we鈥檝e seen before.   

    Interestingly, politically, tariffs have historically been more aligned with Democratic party ideals whereas Republicans have been more interested in free trade.  

    The fact that, theoretically, both parties are now 鈥榦kay鈥� with tariffs, feels a bit like a slap in the face to economists, because our economic models don鈥檛 support the wide-scale use of tariffs. In that sense, if economists generally oppose tariffs while politicians continue to support them, it suggests that tariffs are being used more as a political tool than an economic one.  

  • In what ways can tariffs, especially these tariffs, impact the United States鈥� relationships with other countries?  

    Trade is a reciprocal relationship. We are not only importers. The U.S. also exports goods to other countries. For instance, the U.S. is very efficient at producing airplanes and airplane parts.

    滨迟鈥檚 likely 飞别鈥檒濒 see countries retaliating and putting their own tariffs on our exports, aka a trade war. So, even if you think the tariffs only hurt foreign producers, 颈迟鈥檚 likely that U.S. companies will also see losses in a trade war.  

  • How might these tariffs impact the 鈥渁verage鈥� working American?

    Magnitude wise, we aren鈥檛 100% sure yet. We aren鈥檛 even sure how large the tariffs will be, or for how long they鈥檒l be in place. But I have seen projections of increased household costs around $3,000 per year.

    While workers in tariffed industries might see a pay bump to offset those costs, most people will not. Again, the big takeaway from our tariff models is that, almost certainly, those losses to households will outweigh the value of the benefits from job protection and tariff revenue.   

    Because there can be tens or hundreds of millions of consumers to spread out the cost to households, people might not throw their hands up when 颈迟鈥檚 a price increase of $5 on a t-shirt. 

    However, I do think people will feel those price increases a lot more markedly in industries like automobiles. A 25% tariff in the car industry could raise the price of a car from $40,000 to $50,000. This increase will be much more salient for most households.    

    Unfortunately, tariffs tend to be regressive taxes. That means they hit lower income groups harder than they hit higher incomes in terms of the percentage of income they pay in taxes.  

    Further, thinking of a company as American or foreign isn鈥檛 quite that straightforward.

    Even for cars made in the U.S., car manufacturers often must buy materials from overseas manufacturers 鈥� things like steel and aluminum, right? So, if we put tariffs on steel to bring back steel manufacturing jobs in the U.S., we just increased the cost of materials for our American car companies. This will hurt American profits and jobs in the automobile industry.   

    So even if a car is 鈥渕ade in the U.S.,鈥� 颈迟鈥檚 really partially made elsewhere, so the tariffs may not have the effect we expected. Or maybe they will have the effect we should have expected. 

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• An Economic Perspective

  Quotes from , Ph.D., associate professor of Finance in the Monfort College of Business. 

  • From a financial perspective, what are tariffs and what products/companies are affected?

    Generally, tariffs are basically a tax on goods and services when these goods and services cross a country鈥檚 border.

    The first big misunderstanding is when people think of tariffs as applicable to foreign producers. That is not true. 

    Large numbers of American companies, about 90% of companies within the S&P 500, derive a very significant share of their revenues from activities that are taking place in other countries. 

    If, for example, as is the case with American pharmaceutical companies, the products they make that end up in the United States come from other countries, like Ireland, they鈥檙e going to be impacted by tariffs. In other words, these can be American goods produced by American companies, but whose production takes place abroad for whatever reason. These goods will be tariffed.

  • Generally speaking, who pays for tariffs?

    When a tariff is imposed on something like rolled steel, which is something the Trump administration is doing currently, the increase in cost will be fully paid by the U.S. importer and, in turn, the U.S. consumer.

    Why? Because rolled steel exporters can ship their product anywhere else without being tariffed, so they have no reason to pay any of it on products they ship to the U.S. 

    To what extent, if any, the foreign exporter will bear the cost depends on what we call market power; how much market power they have and how strategic the transaction is to them.

    滨迟鈥檚 complicated, but one way or another, either directly or indirectly, the cost of the tariff will fall onto the U.S. consumer.

    Even in cases where the product is more specific, like, say, a pharmaceutical product or medical device; something that is protected by a patent. In this case, this product is manufactured by a U.S. company operating in Switzerland or Denmark. Here, the tariff will again be fully paid by the importer in the United States.

    Why is this the case? Because it allows the U.S. company to offshore more revenue outside of the U.S. tax net.

  • In what ways can tariffs impact the U.S. domestic economy?

    Tariffs, as an economic tool, are basically equivalent to destroying your own economic infrastructure, both financially and internationally. 滨迟鈥檚 a self-sabotaging policy when it comes to economic growth.

    Economic impacts will manifest in a number of ways:

    • Point one: In effect, tariffs are inflationary and this inflation will come compounded on top of the last three years鈥� worth of runaway inflation.
    • Point two: tariffs tend to reward larger, more dominant players in the market at the expense of smaller, more innovative, more entrepreneurial companies.
    • Point three: tariffs are a tax on consumption more egregious than sales tax, but also far less efficient.
    • Point four: tariffs harm lower and middle income households who face a higher share of their income going towards consumption overall. 

    So, if you wanted to invest in the future of economic development, tariffs would be the last policy point you would consider if you had a modicum of economic literacy. 

    Every single study, empirical or theoretical, currently in place clearly shows to us that tariffs have cost the U.S. economy, both in the short term and the long run. How much? Estimates differ, but one example for just the year 2018 was a 0.4% reduction in U.S. GDP, equivalent to a loss of 360,000 full-time jobs.

    And that鈥檚 just for the 2018 tariffs alone 鈥� tariffs that were impacting less than one quarter of trade flows covered by the administration鈥檚 latest measures.

  • Although tariffs are an economic policy, what impacts can they have on the United States鈥� relationships with other countries?

    This policy is not only economically damaging, it is geopolitically insane on many levels:

    • Level one: we are tearing apart long-term global security arrangements and destabilizing, through weaponization of trade and investments, our own international economic and security infrastructure. 
    • Level two: the global dominance of the U.S. dollar as a trade and reserve currency is the dominant source of U.S. economic and geopolitical power. We are destroying that dominance. This is why China has, in recent weeks, basically said that it doesn鈥檛 need to react to anything that the U.S. is doing beyond matching our tariff rates. 
    • Level three: We are using international treaties as purely instrumental, transactional, largely meaningless covenants that we are willing to destroy at the whim of a single president. The problem with that is that it is not short-term. It is not going to go away when the regime in Washington changes. Once you destroy your own reputation, from then on, it will be perceived that the United States鈥� consent to any agreement is conditional on who sits in the White House. 

    If China were to impose a similar type of tariff on the U.S. in retaliation, it would certainly cost us. We saw that in 2018-2019 when U.S. farmers basically lost access to the Chinese markets. China was easily able to substitute the same commodities they bought from us from other sources like Russia and Brazil.

    U.S. farmers, on the other hand, never fully recovered, despite large scale subsidies deployed by the U.S. government.

    This, in turn, served to see more and more land fall into the ownership of large, centralized food producers 鈥� we financialized more of our agriculture directly away from small and medium sized farms.

  • In your opinion, is there any justification for tariffs as an economic or international policy?

    About the only legitimate reason for using tariffs is to cover cases where foreign suppliers of goods and services are evading distortionary subsidies from their state agencies, for example, which is not really the case in the vast majority of our trading.

    Even setting aside the best possible case for them, the real impact of tariffs is going to be deflationary in terms of demand and inflationary in terms of prices.

    Over a long period of time, the kind of environment these policies will create means that the households that are most impacted, likely lower income households, are more likely to start cutting back in terms of their education expenses, healthcare expenses and childcare expenses to cover the increase in costs of consumption.

    In theory, under perfect conditions and very simplified assumptions, you should be able to take the revenue from tariffs and redirect it towards those households that are most impacted.

    But the problem is that theory never matches practice here. This kind of thing has never been done in any economy ever, throughout history, let alone in the U.S.

    When we look at the outsourcing waves of the 80s and 90s, the global outsourcing of production away from the U.S., we were promised that the losers in this arrangement would be compensated from the benefits of the winners. That did not happen.

    And when we attempt to reverse that process with tariffs, the losers are still not going to be compensated by the winners.

  • What could the U.S. do instead of tariffs if the goal is economic growth and international stability?

    We need to create more targeted, more nuanced types of incentives to invest in America, our workforce, skills, technology, research and development, and innovation. We need to systematically reduce the administrative burden, but carefully, avoiding the urge to go for the blunt, Big Bang measures. 

    Perhaps some of this can be achieved through tax incentives, some through altering U.S. tax codes to reduce corporate tax inversions and tax offshoring. Other forms of incentives can also help, like scholarships for students to help them acquire tangible applied skills, more funding for corporate apprenticeships and improved access to funding for entrepreneurs. Economic policy is hard, nuanced and targeted to specific sectors and activities. 

    And it takes time.

    We need to build an economy-wide, longer-term approach to growth in a sustainable and resilient way. All of this requires a much more subtle way of managing economic resources and policies than the blunt bludgeoning of the economy with tariffs and blanket cuts to public expenditure.

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• A Historic Perspective

  Quotes from Fritz Fischer, Ph.D., professor of History in the College of Humanities and Social Sciences.

  • How have tariffs been used throughout U.S. history?

    Historically, tariffs haven鈥檛 really been a consistent tool of American policy over most of the past 70 years. However, in the 19th century, it was the only revenue tool at the time; there was no income tax, no other taxes. Back then, tariffs made up a very large percentage of the federal revenue.

    Because of the perceived failures of the tariffs in the 1890s and then in the 1930s, no administration has really attempted to make tariffs a major part of their economic policy program, nor has Congress.

  • What have the impacts of past tariffs been?

    In the late 19th century, tariffs may have helped some brand-new industries in the U.S. But they also caused fluctuation in prices and difficulties in the consumer market that ended up either creating or exacerbating depressions and recessions. 

    For example, President Trump has cited the McKinley tariff when discussing his proposed tariff plans. That tariff was in 1890, and came about when McKinley wasn鈥檛 yet president, which is something that has been conflated by this administration with when McKinley was president, which was 10 years later.

    That tariff was meant to protect and advance American industries, but three years later, the second biggest depression in American history occurred. 

    The other famous failed tariff system was the Smoot-Hawley Tariff in the 1930s, which exacerbated the Great Depression. It made it a lot worse because no one had any money, and prices were being raised at the same time. It was double trouble.

  • How do the tariffs being implemented and proposed by the second Trump administration differ from tariffs used by the U.S. in the past?

    In the past, it has been pretty clear what the tariff policy would be for each administration.

    Once the president took office, he would work with congress to set tariff policy on an as-needed basis when they thought other countries were doing something wrong trade-wise. So, while it might have impacted some industries in major ways, folks knew what to expect. 

    Importantly, all tariffs up until Trump鈥檚 tariffs were really decided upon in Congress. Even the McKinley tariff was passed when McKinley was a congressman. But because of a law that Congress passed to allow a president to declare an emergency, and therefore, when he does so, include the declaration of unilateral tariffs, we now have the president doing something that before, only Congress had done. That is a danger to the constitutional system, no matter who the president is. 

    Even the McKinley and Smoot-Hawley tariffs, those were all mistakes, but they were mistakes decided upon by the people鈥檚 chosen representatives and agreed upon by the president. Congress has had no say at all on these most recent tariffs, and that鈥檚 unique in American history.

  • How have tariff policies changed relations with other countries in the past, and how might they do so today?

    The interesting thing there is that tariffs, when they were a thing for most of the 19th century, didn鈥檛 have a huge impact on international relations because the U.S. was too small. No one cared about international tariffs since not many people bought our products, comparatively. The situation is completely the opposite now.

    These tariffs probably won鈥檛 change the U.S. relationship with China too much. The two countries have and will continue to see each other as rivals, as potential enemies.

    But the other major economic bloc in the world, Europe, have historically been American allies. This also includes Canada, Japan and Australia. But there鈥檚 no expectation that they will always be U.S. allies, and things like the drop in Tesla sales around the world might be indicative of these countries starting to see the U.S. as less of a friend and more of an enemy. That鈥檚 the big danger. 

    Since World War II, the U.S. has been largely hesitant to implement tariffs because of the belief that free trade would connect the world. This theory is probably best described by Thomas Friedman鈥檚 argument called the McDonald鈥檚 Theory of Conflict Prevention. His argument was, with very few exceptions, no two countries with a McDonald鈥檚 had ever gone to war with one another. The main idea behind that being that free trade creates peace. 

    So, if the opposite is true, does protectionism, and to a lesser degree, tariffs, create conflict and potentially war?

  • What can history tell us about the potential impacts of these tariffs?

    Notably, some of the terminology that the Trump administration is using when they talk about these tariffs is along the lines of wanting to return to a golden age of America. That, pretty explicitly, must refer to what historians call the Gilded Age of the late 19th century, which was at the same time as the McKinley tariff and other high tariffs. 

    But historians have explicitly called it the Gilded Age, not the Golden Age, because it was gold on the outside and rotten on the inside. The Gilded Age was, in other words, a very difficult time for the majority of Americans. It was a time of the greatest income inequality in the country between the wealthiest and the poorest Americans. 

    So yes, at that time, we saw some success of big business and some of the first millionaires, but not the working class. And we have analogues to those things today with the surge of certain industries and billionaires having a lot of power and control. It was J.P. Morgan and Rockefeller and the big four railroad tycoons back then, and now 颈迟鈥檚 Tesla, Microsoft, Amazon, etc.

  • Thinking of the future, how might historians look back upon this period and on this administration鈥檚 tariff policy in particular?

    I鈥檒l begin with a caveat; historians are great at the past, but we鈥檙e terrible at the future. So, take these kinds of opinions with a pound of salt. That said, I have a book coming out in the fall called Teaching Trump: Critical Issues in History and Civics Education. 滨迟鈥檚 about how the history teachers of the future, even the near future, can teach about Trump and his administrations. 

    Because the first Trump administration is history at this point, this doesn鈥檛 necessarily apply to tariffs or anything going on now, but really, my argument is that one has to teach the first Trump administration as an unprecedented attack on the American constitutional system. And the second administration appears to be making that same attack in even bolder writing.