Adam Smith’s concept of the “invisible hand” is one of the most powerful metaphors in economic thought.
It describes how individuals pursuing their own self-interest in a free market ultimately benefit society as a whole. When left to operate naturally, the free market has a remarkable ability to allocate resources efficiently, create prosperity, and drive innovation.
However, when external forces — whether they be government intervention, protectionist policies, or political retaliation — interfere with this process, the invisible hand can quickly transform into a sucker punch.
Tariffs, while sometimes useful as a negotiation tool, become dangerous when they are weaponized for political purposes. When that happens, it is not foreign governments or corporations that pay the price; it is the American taxpayer.
The latest example of this economic heavy punch — since pulled back — was the announcement by President Trump that he will double tariffs on Canadian steel and aluminum from 25% to 50% in response to Canada’s decision to raise electricity prices.
Fortunately, Trump reversed course; he did so for good reason. I suspect he listened to wise counsel. While the bold move to increase the tariff may seem like a tough counterpunch to an international competitor, the reality is that such retaliatory measures often hurt the very people they intend to protect.
When Tariffs Work and When They Don’t
Tariffs are a tool, and like any tool, they can be used wisely or recklessly. When used strategically — as a means of negotiating better trade deals or protecting critical American industries — they can serve a legitimate purpose.
For example, when President Trump first implemented tariffs on China, it was part of a broader strategy to force Beijing to the negotiating table over unfair trade practices. This ultimately led to the Phase One Trade Deal, which resulted in significant concessions from China, including increased purchases of American agricultural goods.
However, when tariffs devolve into weapons of retaliation, they create a ripple effect of unintended consequences. Take the case of the steel and aluminum tariffs on Canada.
The logic behind these tariffs was not rooted in economic necessity but rather in political posturing. The Trump administration was going to use them as a countermeasure against a policy decision in Canada that has little direct connection to the U.S. steel industry.
This is where the invisible hand is replaced by the right hook, and the ones who get hit the hardest are American businesses and consumers.
The Real Cost to American Taxpayers
Raising tariffs on Canadian steel and aluminum would mean that American companies relying on these materials — especially in the manufacturing and construction sectors — will pay significantly more for their raw materials. Those costs will then be passed down to consumers in the form of higher prices for everything from automobiles to appliances to infrastructure projects.
In other words, the taxpayer is the one footing the bill. The government doesn’t pay tariffs — businesses and consumers do. If a company that buys Canadian steel is suddenly forced to pay double the import tax, that cost is absorbed by either raising prices or cutting jobs. Neither outcome is beneficial to the American worker.
Furthermore, Canada is one of our closest allies and trading partners. Engaging in a trade war with a friendly nation over an unrelated domestic policy, risks damaging long-term economic cooperation. Tariffs of this magnitude could lead Canada to retaliate, targeting American industries in response.
The result? More economic uncertainty, fewer jobs, and even greater costs for U.S. businesses and consumers.
A Smarter Approach to Trade Policy
The United States should always prioritize fair trade practices that put American workers and businesses first. However, that does not mean engaging in trade wars without clear strategic objectives.
We must ask ourselves: What is the goal of these tariffs and are there better alternatives? If the answer is not tied to a well-defined economic benefit for American industry, then we must reconsider whether tariffs should be imposed at all.
Instead of weaponizing tariffs, a smarter approach would involve:
- Leveraging tariffs as negotiation tools rather than as blunt-force instruments. Tariffs should be used to secure better deals for American workers, not as knee-jerk reactions to policy disputes.
- Strengthen trade alliances with key partners; Canada is not China. Treating a strong, economic, ally as an adversary could weaken our global standing and create unnecessary friction.
- Focus on tax and regulatory reforms. If we truly want to strengthen American manufacturing, we should focus on reducing the tax burden on businesses, cutting red tape, and investing in workforce development.
Economic strength does not come from artificially manipulating markets through tariffs, but from creating an environment where businesses can thrive naturally.
The invisible hand works best when left unshackled. If we turn it into a heavy fist, we run the risk of punching ourselves in the face.
The Trump administration has used tariffs successfully in the past, but doubling down on Canadian steel and aluminum tariffs is a step in the wrong direction. Rather than benefiting the American worker, it will only make goods more expensive, businesses less competitive, and our economy more volatile.
If we want to put America first, we must do so with a strategy that strengthens our industries without punishing our people. Tariffs can be a useful tool, but only when wielded wisely.
When misused, they become nothing more than a hidden tax on the very people they claim to protect.
Jim Renacci is a businessman, former U.S. Congressman from Ohio, and a strong advocate for constitutional principles. During his time in Congress, he served on the House Ways and Means Committee and the Budget Committee, where he worked to rein in government overreach and push for pro-growth policies that put Americans first. Read Jim Renacci's Reports — More Here.