Who Benefits from Tariffs? Tariffs Are Not "Protection" but "Additional Taxation on Households" ─ The Real Reason the Market Is Wary

Who Benefits from Tariffs? Tariffs Are Not "Protection" but "Additional Taxation on Households" ─ The Real Reason the Market Is Wary

Tariffs often become a straightforward symbol of "strength" in the political realm. Imposing taxes on imported goods seems to protect domestic companies, increase employment, and reduce trade deficits—intuitively, that's how it sounds. However, when viewed from the perspective of financial markets and the real economy, the story is much more complex.


What Seeking Alpha reported was a warning from Tony Roth, Chief Investment Officer (CIO) of Wilmington Trust Investment Advisors. Roth pointed out that tariffs are more likely to create "far greater economic pain" than potential long-term benefits and that they have not led to a reduction in trade deficits or a boost in U.S. industries.


The weight of this perspective for investors lies in the fact that tariffs erode "household purchasing power" before "corporate competitiveness," and this impact can ripple through corporate earnings and the overall economy.


1) The true nature of tariffs is "close to a sales tax"—who pays the most?

Since tariffs are paid by importers, they superficially appear to be a corporate burden. However, in practice, they are often passed on to consumers in the form of price increases. Roth's description of tariffs as "something like a sales tax" stems from this very "reality of pass-through."


The pain point here is regressivity. The less room there is to escape price increases on essentials and daily necessities, the higher the expenditure ratio to disposable income. As a result, the same price increase hits lower-income groups harder.


This point resonates strongly on social media. Posts like "Tariffs ultimately show up on the grocery receipt" and "Expenses just keep increasing even though salaries don't" tend to gain traction because they directly relate to personal experiences. In the context of investments, if spending shifts toward defensive necessities, discretionary spending (such as dining out, apparel, and durable goods) tends to shrink.


2) The "trade deficit doesn't shrink" issue—discrepancy between aims and results

When discussing tariffs, "reduction of trade deficits" is often cited as a performance indicator. However, trade deficits are not something that can be simply influenced by tariffs alone. They are intertwined with multiple factors such as domestic demand, exchange rates, business cycles, supply constraints, and the redesign of corporate procurement networks.


Even if tariffs reduce imports from specific countries or on specific items, companies will re-source from other countries or through different routes. This often results in a scenario where "only the supplier changes, but imports continue," creating a gap between the policy's aim (deficit reduction) and the reality (cost increases and supplier replacement).


On social media, criticisms such as "If the deficit doesn't shrink, only household burdens increase" and "It's ultimately just a negotiation card with no permanent industrial development strategy in sight" are prominent. On the other hand, from the opposing stance, there are voices saying "The goal is to bring supply chains for strategic materials and important industries to domestic or allied countries, rather than the deficit itself." This means the focus of the debate is divided between economic efficiency (price and growth) and security (supply chains and technology).


3) What the market dislikes now is not just "prices"—it's the weakening of consumption

The impact of tariffs is not limited to prices. When prices rise, consumers change their purchasing priorities. They switch to cheaper alternatives, reduce purchase frequency, or stop buying altogether.


One of the points suggested by the Seeking Alpha article is the "hardship of low-income groups" and "changes in the employment environment." In a phase where employment softens and wage growth slows, cost increases can easily undermine consumption. From the corporate perspective, raising prices can reduce quantities, and not raising prices can erode profits. Either way, it can cast a shadow over earnings reports.


On social media, this point is expressed in the words of everyday people. "I've been enduring 'price hike fatigue,' but it's now at its limit" and "I have no choice but to postpone replacements." For investors, this is also a sign that selecting stocks in the consumer-related sector becomes even more important.


4) Why tariffs are still supported—the narrative of "long-term benefits"

So why do tariffs garner support? The biggest reason is that the narrative of "long-term benefits" is easy to understand. Reshoring, employment, industrial base, and bargaining power—all sound appealing as national strategies.


Moreover, while short-term pain is easily dispersed, benefits tend to concentrate on specific industries and regions. Politically, this structure becomes a strong tailwind.


On social media, opinions like "There's pain, but it's necessary for the country" and "Continuing to rely on cheap imports is more dangerous" are persistent. Especially after experiencing supply chain disruptions and geopolitical risks, the idea of accepting costs as "insurance premiums" tends to gain support.


However, from an investment perspective, the tricky part is the uncertainty about when, to what extent, and which companies will benefit from these "long-term benefits." Increasing domestic production requires capital investment, human resources, energy, and regulatory compliance, which takes time. During this transition period, households and companies bear the initial pain.

5) Summary of SNS reactions: The visible "disconnect" in pros and cons

 

When summarizing the SNS reactions to this topic, the discussion points converge into the following four categories.

  • Opponents:
    "Tariffs = tax on households," "Harder for low-income groups," "Trade deficit doesn't decrease," "Ultimately leads to high prices and economic slowdown"

  • Conditional supporters:
    "Important industries should be protected, but the scope should be limited," "Domestic investment, tax cuts, and regulatory reforms should be prerequisites"

  • Supporters:
    "Supply chain security," "Revival of domestic employment," "Card for foreign negotiations"

  • Skeptics (politically distrustful):
    "Ambiguous performance indicators," "Costs are borne by the public for the performance of 'strong policies'"


What is particularly striking is that opponents talk about "this month's household budget," while supporters talk about "the nation 10 years from now," making it easy for discussions to miss each other. When the time axis differs, conclusions change even when looking at the same facts. The lesson for investors here is not to simplify the pros and cons of policies but to observe short-term costs and long-term structural changes separately.


6) Investment perspective landing point: Who bears the risk and who can withstand it?

If tariffs are "close to a sales tax," companies with strong price pass-through capabilities have short-term resilience. Conversely, industries with intense price competition and thin margins, or businesses with low-income groups as their main customers, are more likely to face headwinds.


Additionally, companies with a high import ratio or strong dependence on overseas components are more likely to be hit by costs. Conversely, companies with a high domestic procurement ratio or those with pricing power (brand, oligopoly, difficult substitution) are relatively well-defended.


However, tariffs are subject to political schedules, making it difficult to predict when they will strengthen or ease. The biggest risk is the "uncertainty" itself, which makes it difficult for companies to make long-term investment decisions. What the market truly dislikes may be the "unpredictability" more than the cost increase.


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