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

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

A piece of economic policy once deemed so complicated and tedious that it could bore a room of high school students out of their minds 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’s Economics, Finance and History programs share their expertise and shed some light on what tariffs are, how they’re being implemented and what kinds of impacts they might have.

• An Economic 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 “protect” 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, it’s like, “hey, 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.”  

    That $5 billion can subsidize tens of thousands of jobs. It’s 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 – 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.