Imposing tariffs diverts resources to lobbying efforts that could have been used for productive purposes.
W ith President Trump’s new tariff strategy to take effect on August 1, countries hoping to strike a deal with the U.S. have to act quickly or face tariffs on their exports ranging from 15 percent to 50 percent. Trump already announced 35 percent duties for Canada, 50 percent for Brazil, and 30 percent for Mexico. Other countries — Japan, Indonesia, and the Philippines — have already reached arrangements to reduce certain duties. The EU joined this group on Sunday.
In response to concerns that this approach will raise prices on imported goods, U.S. officials are quick to say that people won’t pay more if they simply “buy American.” Trump and Secretary of Commerce Howard Lutnick have stated repeatedly that U.S. consumers don’t have to worry because domestic products won’t face tariffs.
But it’s not that simple. In his classic 1967 paper, “The Welfare Costs of Tariffs, Monopolies, and Theft,” economist Gordon Tullock described the hidden effects that tariffs produce — costs that often go unnoticed. Tariffs don’t just involve more work for customs inspectors and brokers; they also require significant resources that are simply wasted on political rent-seeking.
The Customs Burden
Customs costs involve both public and private expenditures. The government must fund not only customs inspection but also Coast Guard operations to deter smuggling. Meanwhile, the private sector contracts customs brokers to manage the importing process. These expenses are often treated as negligible, but when tariffs rise sharply, inspectors, the Coast Guard, and brokers all face heavier workloads — and taxpayers and importers foot the bill.
This is already happening. Customs brokers are experiencing unprecedented demand, with some working 13-hour shifts to process the current flow of imports. Their work has also become increasingly complex, as continuous tariff changes require them to stay up to date to help clients comply with proper classifications.
The Lobbying Trap
Tariffs trigger extensive governmental petitioning by competing groups — a process that’s detrimental to the U.S. economy. Domestic producers eagerly lobby officials for higher tariffs on their particular products, knowing this will allow them to sell more or raise prices without facing overseas competition. But other groups pressure the government in the opposite direction: Consumers and manufacturers want products they normally buy or use as inputs to be exempted from tariffs to avoid higher costs.
These groups could spend substantial time and valuable resources lobbying for tariff increases or exemptions, up to the net present value of all future money these tariffs represent. Crucially, all these resources could be used for something more productive than, say, dining with government officials to secure tariff adjustments. As Tullock observed, “These expenditures, which may simply offset each other to some extent, are purely wasteful from the standpoint of society as a whole; they are spent not in increasing wealth, but in attempts to transfer or resist transfer of wealth.”
Examples of this process are already unfolding. The lobbying sector is experiencing significant growth this year. While few industries will publicly demand higher tariffs on their own products, steel and aluminum producers plainly benefit from protection and have every reason to press for it. Meanwhile, automobile, pharmaceutical, energy, and semiconductor companies are all requesting exceptions for their inputs. Even fireworks retailers, who rely on Chinese imports, are petitioning for exclusions from these tariffs.
The Real Cost
In short, it’s not as simple as “just buy American.” Tariffs create a cascade of costs that reduce U.S. productivity. Officials and companies involved in customs face dramatically increased workloads. Far more damaging, however, is the substantial share of resources diverted to lobbying efforts that could have been used for productive purposes. The U.S. should abandon this wasteful allocation of resources and return to the policy that allows their best use and genuine wealth creation: free trade.