The psychology of tariffs!

“They Tax Us, We Tax Them.” That’s how Donald J. Trump— U.S. President and master rhetorician—framed the world of international trade. Short. Punchy. Raw. It wasn’t just policy. It was war paint smeared across the face of globalization.

Behind this simple phrase lies a complex truth that economists have debated for decades, but Trump understood something many policymakers didn’t: the human brain is not wired to interpret trade policy through spreadsheets and supply chains. It is wired for stories—especially ones about fairness.

Let’s explore how the language of fairness and nationalism—not cold economic data—shapes the public’s perception of tariffs. It’s a journey through behavioural economics, tribal psychology, and the stories politicians tell to justify global economic shifts. In the end, we’re not just importing steel or exporting soybeans—we’re exporting identity, dignity, and a deep yearning for justice.

Behavioural psychology teaches us that people care more about fairness than absolute gain. In a classic study known as the Ultimatum Game, participants consistently rejected monetary offers they perceived as unfair, even if rejecting meant walking away with nothing. People would rather burn the money than be disrespected. Tariffs, in this sense, becomes a psychological revenge. Not a revenue tool. Not a balance-of-trade strategy. But payback.

When Trump imposed tariffs on $250 billion worth of Chinese goods during his presidency, he claimed it was because "China has been taking advantage of us for years.” In this framing, tariffs were not about economics—they were about restoring dignity. According to a Pew Research Center poll in 2020, 67% of Republican voters supported increased tariffs on Chinese goods, despite mounting warnings from economists that the policy could hurt American consumers through higher prices. In fairness terms, it didn’t matter. Even if the net economic impact was negative, the moral arithmetic felt right. Globalization promised cheaper goods and borderless markets. But what it didn’t promise was cultural continuity. People watched their towns hollow out, factories close, and foreign-made labels take over kitchen shelves. Enter nationalism—not as a political strategy, but as a cultural survival instinct. The 2016 and 2020 Trump campaigns wielded economic nationalism like a hammer: “America First,” “Bring Back Jobs,” “Stop the Cheating.” These slogans resonated not because they were policy-laden, but because they spoke the emotional language of those who felt abandoned. In fact, according to the Economic Innovation Group, between 2007 and 2016, over 50 million Americans lived in economically distressed communities. These were the very voters who rallied behind tariffs—not because they had read The Economist, but because they had watched their neighbour’s shop shut down.

Let’s be clear—tariffs are not costless. The US Congressional Budget Office (CBO) estimated in 2023 that the Trump-era tariffs cost American consumers and businesses approximately $57 billion annually. Additionally, the Peterson Institute for International Economics (PIIE) found that retaliatory tariffs by China and the EU reduced U.S. exports by 26% in affected sectors. And yet, support remains high—particularly in swing states like Ohio, Pennsylvania, and Michigan. Why? Because fairness doesn’t wear a calculator. It wears a flag.

Trade policy is complex. It involves international arbitration, WTO rules, multinational supply chains, currency fluctuation, and logistics. But humans aren’t complexity-loving creatures—we’re cognitive misers. We gravitate toward narratives that make emotional and moral sense.

Trump’s rhetoric— “They tax us, we tax them”—boils down a vast global system into a reciprocity equation that even a 5th grader can understand. This kind of framing appeals to System 1 thinking, as coined by Nobel laureate Daniel Kahneman: fast, emotional, and instinctive. It bypasses the analytical part of the brain and strikes directly at gut-level intuitions.

Contrast this with how economists speak: in terms of “deadweight loss” or “consumer surplus”. Guess which one resonates more with a laid-off factory worker? Underneath tariff rhetoric lurks an even deeper psychological instinct—tribalism. In global trade, countries become avatars of pride or threat. China isn’t just a trading partner—it’s “them”. And we are “us”.

This is called ingroup-outgroup bias, and it governs much of human behaviour—from sports fandom to warfare. When tariffs are framed as acts of economic defence, they feed the need to protect the ingroup—even if, statistically, everyone loses a little. Interestingly, a 2021 study by Stanford University showed that Americans are more likely to support tariffs if they believe the opposing country is cheating, regardless of actual trade deficits. Emotion, not evidence, guides consent. The irony of tariffs is that they often hurt the very people they claim to protect.

In 2018, US farmers faced $11 billion in retaliatory tariffs from China, primarily on soybeans. The government responded with a bailout of similar size. It became a loop of loss and compensation.

Yet, interviews from farm belt states showed that many farmers still supported Trump’s trade war. As one Iowan told The Wall Street Journal: “We’ll take a hit now, if it means our kids don’t have to grow up under China’s thumb.” This isn't logic. It’s legacy. Tariffs weren’t a policy—they were a personal sacrifice for a moral cause.

What this reveals is a vital truth for economists, journalists, and policymakers alike: if you want people to understand and support trade policy, you must speak the language of identity, fairness, and emotional security. Facts are necessary, but not sufficient. Data must ride on the back of story.

Instead of dismissing tariff rhetoric as “populist nonsense,” perhaps it’s time to understand what pain and powerlessness gave rise to it. The real battle in trade policy isn’t just on spreadsheets—it’s in hearts, neighbourhoods, and forgotten Main Streets.

Tariffs might feel fair. They might feel just. But fairness built on misunderstanding is still a kind of mirage.

If leaders wish to champion truly fair trade, they must broaden the narrative. One that doesn’t just punish, but partners. One that acknowledges the wounds of the working class without throwing gasoline on global flames. Because real fairness is not about taxing back—but lifting up. And that, too, is a story worth telling.