Imagine a street performer’s shell game—three cups, one hiding a small prize. The fast-moving hands create an illusion of opportunity, but in reality, the game is rigged. Tariffs operate in much the same way. The promise of job protection is one shell, seemingly offering security to workers in specific industries. But lift another shell, and the truth is revealed: consumers paying higher prices, businesses struggling with inflated costs, and fewer opportunities in the broader economy. The final shell, often overlooked, hides the most insidious consequence—reduced innovation and a weaker economic future for our children.
The appeal of protectionism is understandable. No one wants to see jobs disappear. Yet, like the shell game, tariffs rely on distraction, concealing long-term economic damage behind the illusion of job preservation. While a few politically connected industries benefit, the larger economy suffers, with higher costs rippling across every sector. The unintended consequences undermine the very prosperity we seek to conserve, leading to fewer jobs and diminished opportunities for future generations.
About the Author: Jeff Hulett leads Personal Finance Reimagined, a decision-making and financial education platform. He teaches personal finance at James Madison University and provides personal finance seminars. Check out his book -- Making Choices, Making Money: Your Guide to Making Confident Financial Decisions.
Jeff is a career banker, data scientist, behavioral economist, and choice architect. Jeff has held banking and consulting leadership roles at Wells Fargo, Citibank, KPMG, and IBM.
The Seen and the Unseen: The True Cost of the Shell Game
Economist Frédéric Bastiat’s essay That Which is Seen, and That Which is Not Seen offers a useful framework for understanding the tariff shell game. The "seen" effect is the preservation of jobs in protected industries. The "unseen" effect is the cascading harm—higher consumer prices, reduced business competitiveness, and job losses in industries without political protection.
Consider an American steelworker. A tariff on imported steel shields their job, creating a sense of security. But shift the shell, and we see construction companies paying more for materials, automobile manufacturers facing higher costs, and everyday consumers absorbing the increased prices. These industries—unprotected by tariffs—must either shrink, cut jobs, or pass on costs to the public. In the end, more jobs are lost than saved.
Even worse, retaliation from other nations further disrupts the economy. When U.S. agricultural exports face retaliatory tariffs, farmers suffer. When technology companies lose foreign buyers, their workers feel the squeeze. The shell game distracts from this broader economic contraction, making protectionism appear beneficial when it is, in fact, a net loss.
Comparative Advantage: The Shell We Should Be Playing
David Ricardo’s theory of comparative advantage reveals the true path to prosperity. Nations flourish by specializing in industries where they are most efficient and trading for other goods. Tariffs interfere with this natural allocation of resources, forcing capital and labor into less productive sectors.
In an open economy, a worker displaced from a declining industry can transition into a more dynamic field—one with better wages and stronger long-term prospects. But when tariffs keep inefficient industries afloat, they block these transitions. The economy becomes trapped in a losing game, stuck shifting the same shells without creating new value.
Historically, protectionism has failed to produce lasting gains. If tariffs had shielded every struggling industry, America would still be reliant on fading 19th-century sectors instead of leading in technology, pharmaceuticals, and aerospace. Our children’s economic future depends on adaptability, not artificially propped-up industries.
The Burden on Consumers: The Shell Hiding the Hidden Tax
Tariffs function as a hidden tax, with costs passed down to consumers. Every tariff increases the price of imported goods, which raises costs for businesses and households alike.
For example, when the Trump administration imposed tariffs on Chinese steel, domestic steelmakers briefly benefited. However, construction firms and car manufacturers saw their input costs surge. These price hikes reduced demand, leading to layoffs in industries employing far more people than the steel sector. The shell game concealed the real impact: a net reduction in employment and economic vitality.
Consumers bear the greatest burden, paying more for everything from appliances to automobiles. This reduces disposable income, curbing spending in other industries. The illusion of tariff-driven job protection collapses when viewed in full—higher prices lead to lower consumption, which leads to job losses elsewhere. Instead of playing a game designed to take money from unsuspecting participants, an open-market approach ensures real gains for everyone.
Innovation Stifled: The Disappearing Shell of Progress
The most damaging consequence of tariffs is their chilling effect on innovation. Competition drives technological advancements, process improvements, and productivity gains. Shielded from global competition, domestic industries lose their incentive to modernize.
Take the American automobile industry as an example. In the 1970s and 1980s, Japanese car manufacturers surged ahead with fuel-efficient, high-quality vehicles. Had the U.S. responded with extreme protectionism instead of competition, domestic automakers might have stagnated. Instead, the challenge forced them to improve quality, embrace new technologies, and remain competitive. A similar story played out in computing, where U.S. firms thrived by competing globally rather than retreating behind tariff walls.
When industries rely on tariffs instead of innovation, they stagnate. Research funding dries up, operational efficiency declines, and global competitiveness erodes. The end result? Our children inherit an economy that is less dynamic, less productive, and less capable of generating new opportunities.
Tariffs and the Fallacy of Job Protection: A Losing Game
Proponents of tariffs argue that they protect jobs, but they fail to acknowledge economic adaptation. Industries evolve, markets shift, and labor must move where it is most valuable. The long history of economic progress confirms this truth.
Agriculture once employed over 40% of Americans; today, it employs less than 2%, yet the economy has grown exponentially. The same pattern has repeated across multiple industries: blacksmithing, once an essential trade, faded with the rise of industrial manufacturing; switchboard operators, once needed for telephone connections, disappeared with digital technology; horse-drawn carriage makers vanished as automobiles became the dominant mode of transport; ice delivery men were replaced by the advent of refrigeration; and film developers, once critical to photography, saw their industry collapse with the rise of digital cameras. These industries receded not because of protectionist policies, but because economic growth created better opportunities elsewhere. Tariffs that attempt to “lock in” jobs in outdated industries only delay necessary transitions, prolong economic inefficiencies, and reduce long-term job creation. The decline of manufacturing jobs in the U.S. has coincided with a rise in service and technology employment, sectors that provide higher wages and better working conditions. Tariffs that attempt to “lock in” jobs in outdated industries only delay necessary transitions, prolong economic inefficiencies, and reduce long-term job creation.
Conclusion: Ending the Tariff Shell Game
The temptation to impose tariffs is understandable, given human nature’s tendency to compare. Instead of measuring progress against historical economic gains, many focus on wealth disparities around them and assume tariffs will help them “catch up.” This belief is the ultimate economic sellout—trading broad-based prosperity for an illusion of immediate gain.
Protectionism offers a fleeting sense of security, but it distorts markets, raises consumer prices, and diverts resources from industries of the future. The biggest shell impacted by tariffs is the future of our children. By artificially preserving inefficient jobs for their parents, tariffs prevent economic transformation, blocking their path to new industries and greater prosperity. However, in an open and dynamic economy, the children of a freer system will reap the rewards, benefiting from innovation and the wealth created by an adaptable marketplace. The failure to embrace progress today will be a burden they must overcome tomorrow. The real victims of tariffs are not just today’s consumers, but future generations who will inherit an economy less capable of adapting, innovating, and thriving. If we want to ensure prosperity, we must abandon the tariff shell game and embrace free trade. Only then can we secure economic opportunity—not just for ourselves, but for those who follow.
Resources for the Curious
Bastiat, Frédéric. That Which is Seen, and That Which is Not Seen. 1850.
Ricardo, David. On the Principles of Political Economy and Taxation. 1817.
Roberts, Russell. The Choice: A Fable of Free Trade and Protectionism. 2007.
Smith, Adam. The Theory of Moral Sentiments. 1759.
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