Tariffs = Rising Inequality: Protecting Jobs? Or Protecting Shareholders?
The Rich Are Winning Again, Trump’s Tariffs Are An Example: How 'Trickle-Up' Economics Is Fueling Inequality and What Your MP Doesn't Want to Talk About
Economist Ha-Joon Chang has been doubtful about the effectiveness of Donald Trump's tariff policies in reducing economic inequality. He argues that while tariffs are intended to create local industrial production, America currently lacks the industrial foundation and requisite skilled workforce. This places it in the position to not benefit meaningfully from such protectionism in the short term (Chang, 2018). Chang believes that restoring a national factory base is no overnight task but a long-term project. In the meantime, tariffs can lead to increased consumer prices whose effects disproportionately weigh on low-income communities and might worsen inequality (Chang, 2018).
Gary Stevenson, a retired economist and trader, has also questioned the real-world effects of Trump's tariffs. In an interview with Ha-Joon Chang, Stevenson questioned whether tariffs really add to national wealth or simply lead to higher prices for consumers without much improvement in domestic production (Stevenson, 2024). He noted that tariffs alone will not reduce inequality and will more likely exacerbate it by imposing an additional burden on the poor without accompanying investments in human capital and infrastructure (Stevenson, 2024).
Both Chang and Stevenson ultimately conclude that tariffs may be politically popular, but is less likely to reduce inequality unless accompanied by broader economic transformation and redistributions.
There is mixed evidence on whether tariffs have helped bring major investment in infrastructure and labour, or if they have spurred more shareholder benefits instead.
Evidence of Infrastructure and Workforce Investment:
Following Trump's imposition of tariffs, JCB (a British machinery manufacturer) announced it would double the size of its new San Antonio, Texas, factory in the US. The investment will be $500 million and could create up to 1,500 jobs (The Times, 2025).
General Motors (GM) ramped up its light-duty truck production at the Fort Wayne, Indiana facility following the imposition of 25% tariffs on auto imports. This was followed by the employment of a few hundred temporary workers (Reuters, 2025).
The Taiwan Semiconductor Manufacturing Company (TSMC) pledged to spend $100 billion on American chip manufacturing over four years, including five new plants in Arizona, during international trade tensions and tariff policies as among the drivers (New York Post, 2025).
UK engineering company Smiths Group opened up its U.S. manufacturing facilities for semiconductor test equipment. It moved production from China to Texas because of trade restrictions and tariffs (Financial Times, 2025).
Evidence of Shareholder Priority over Reinvestment:
A 2024 CFO Magazine study found that High Payout Companies (HPOCs) have increasingly emphasised shareholder dividends over reinvestment. In 1999, they spent about 40% of operating income on capital expenditures and R&D; in 2019, while these reinvestment rates were level or down, payouts to shareholders were significantly up (CFO, 2024).
The same study confirmed that the divergence between reinvesting capital and paying out to shareholders has been rising, most notably in developed industries, to reflect a medium-term trend whereby profits are progressively being distributed to shareholders instead of being invested in building workforce potential or domestic infrastructure (CFO, 2024).
What this means is, jobs offered today are likely only short term and nothing more than rhetorical posturing. Owners are continuing predatory practices that employ ordinary people today and get them spending in the economy, but ultimately leave them in precarious work situations. This is an example of trickle up economics where the wealthy asset owners get richer, contributing to rising inequality, lowering living standards for everyone else.
The theory that money somehow ends up in the pockets of the rich, regardless of how it is acquired, is a criticism commonly directed at both trickle-down and, in certain situations, trickle-up economics.
Even though trickle-up economics is normally portrayed as a way to spark growth from the bottom up via enhanced lower-income spending, some researchers argue that, without structural interventions, much of the funds invested in lower levels of the economy still will make its way up to asset-holding elites via mechanisms such as rent, interest, and corporate profits (Chakrabarti & Chakrabarti, 2011).
It has been observed in systems where the consumption of consumers increases due to stimulus or wage increases, but the actual beneficiaries at are large corporations and wealthy shareholders who hold the supply chains, real estate, or capital assets involved (Chakrabarti & Chakrabarti, 2011).
Similarly, critics of trickle-down economics note that its application through policies like capital favouring the rich and taxes reduced for high-income earners has a tendency to benefit wealth convergence at the top, while providing less payoff for society. The phenomenon was recently described as "trickle-down economics on steroids" in relation to policies crafted with capital favours extended to rich over labour considerations (The Guardian, 2025).
The key concern in all of these models is that, without redistributive action, economic flows—whether domestic or foreign—fall into the hands of those who possess the maximum monetary power and influence (The Guardian, 2025; Chakrabarti & Chakrabarti, 2011).
Decreasing rising inequality calls for a package of measures of redistribution. While increasing income taxes on high-income earners is a favourite, it is also seen by some as penalising or wasteful. Other measures like wealth taxes and closing up tax loopholes are often seen as better suited for ordinary people.
Extreme top marginal tax rates on high-income earners are sometimes criticised as penalising success and discouraging productivity, innovation, and investment. This argument is based on traditional economic theory that is incentive-based and centered on efficient markets (Hoover Institution, 2019). This is where the "data" typically lurks in arguments that state if you tax millionaires they will leave, but this thinking is dishonest. Its disingenuous because there are a high earners who might earn 2 million and already pay a lot of income tax. Similarly, there are wealthy assets owners of 10 million plus who earn passive income in the thousands, millions a week, and pay nothing on that passive income. Placing a 1% tax on these assets would raise billions to fund our NHS, if the wealth stays here in the UK, which homes, mortgages, rents etc will be kept in the UK. This is exactly what is meant by a wealth tax, and the idea that wealthy assets owners will leave is silly because the assets are here. These are the least mobile people and they need you for their money, your rent, your mortgage, your government renting assets from them. If you tax them they’ll have to sell the assets that ordinary people and governments can buy back to live and fund services.
The Institute for Fiscal Studies (IFS) warned that higher top-end income tax could not bring about higher revenues. They can respond through tax avoidance, emigration, or reduction of their economic activity, which will detract from the desired fiscal dividends (The Times, 2024).
Wealth taxes are clearer in targeting inequality than income taxes because they target the concentration of assets like property, equities, and inheritance. It has been argued that this reduces long-term privilege entrenchment and generates revenue for public services (Peter G. Peterson Foundation, 2023).
Most wealthy individuals exploit loopholes and favourable tax provisions (e.g., rates on capital gains, offshore tax havens). Plugging them can generate revenue more equitably without increasing rates on earned income (Center for American Progress, 2022).
Investments in public goods with tax money such as healthcare, education, and housing yield concrete, tangible advantages to lower- and middle-class citizens. Public programs can help reduce inequality by maximising the prospects for the majority of individuals (Peter G. Peterson Foundation, 2023).
The evidence is clear-cut: in the name of "economic nationalism" or "rebuilding industry," tariff-driven policies and low redistributive models are not yielding for the average person. Without deep structural investment in people and infrastructure, argue Ha-Joon Chang and Gary Stevenson, tariffs only raise consumer prices and transfer benefits to the rich.
This isn’t theoretical. It’s happening now. While a few headline-grabbing investments might make the news, the real story is how profits continue to flow upward—into the pockets of shareholders, landlords, and asset owners—while ordinary people struggle to keep up with rising rents, stagnant wages, and underfunded public services.
We’ve been sold the myth of trickle-down and now trickle-up—both delivering the same result: wealth consolidating at the top.
What can you do, then?
Write an email to your MP and demand:
- The introduction of a wealth tax on billionaires and asset owners.
- The closure of tax loopholes exploited by the wealthy to avoid paying their due.
- Investment in public services like the NHS, housing, welfare safety nets for all and schools through this recovered wealth.
- A just economy that isn't predicated on slogans—but on concrete, redistributive action.
Don't let this slip away. If we don't make things happen, the system will pay off those who already have everything—and make the rest of us pay for it.
References:
- Center for American Progress. (2022). 5 Little-Known Facts About Taxes and Inequality in America. Retrieved from: https://www.americanprogress.org/article/5-little-known-facts-about-taxes-and-inequality-in-america
- CFO. (2024). Shareholder Distributions vs. Reinvestment: The Gap Grows. Retrieved from: https://www.cfo.com/news/shareholder-distributions-vs-reinvestment-the-gap-grows/655790
Chakrabarti, A. S., & Chakrabarti, B. K. (2011). Inequality, mobility and wealth condensation in a multiplicative asset exchange model. arXiv. Retrieved from: https://arxiv.org/abs/1105.2122
- Chang, H.-J. (2018). Examining Trump's claims that tariffs will revitalize American manufacturing. PBS NewsHour. Retrieved from: https://www.pbs.org/newshour/show/examining-trumps-claims-that-tariffs-will-revitalize-american-manufacturing
- Financial Times. (2025). Smiths increases US production of chip testers due to trade constraints. Retrieved from: https://www.ft.com/content/5795c872-a30b-4b62-a10b-7975126fc224
Hoover Institution. (2019). The Case Against High Marginal Tax Rates. Retrieved from: https://www.hoover.org/research/case-against-high-marginal-tax-rates
- New York Post. (2025). Taiwanese chip giant TSMC to announce $100B US investment plan under threat of Trump's tariff. Retrieved from: https://nypost.com/2025/03/03/business/taiwanese-chip-giant-tsmc-to-reveal-100b-us-investment-plan-report
Peter G. Peterson Foundation. (2023). What is a wealth tax and should the United States have one? Retrieved from: https://www.pgpf.org/article/what-is-a-wealth-tax-and-should-the-united-states-have-one
- Reuters. (2025). GM to increase truck production in Indiana following Trump's tariffs*. Retrieved from: https://www.reuters.com/business/autos-transportation/gm-increase-us-truck-production-following-trumps-tariffs-2025-04-03
- Stevenson, G. (2024). Can tariffs make you rich? with Ha-Joon Chang [Instagram Video]. Gary's Economics. Retrieved from: https://www.instagram.com/garyseconomics/reel/DH_bV40ynPI/
- Stevenson, G. (2024). Can tariffs make you rich? with Ha-Joon Chang [YouTube Video]. Retrieved from:
The Guardian. (2025, February 10). The Guardian view on Trump’s trade betrayal: rhetoric hides trickle-down economics on steroids. Retrieved from: https://www.theguardian.com/commentisfree/2025/feb/10/the-guardian-view-on-trumps-trade-betrayal-rhetoric-hides-trickle-down-economics-on-steroids
- The Times. (2025). JCB to double size of US plant in wake of Trump tariffs. Retrieved from: https://www.thetimes.co.uk/article/jcb-to-double-size-of-us-plant-in-wake-of-trump-tariffs-cm7z06qzv
The Times. (2024). Tax rises on higher earners will not bring extra revenue, IFS warns. Retrieved from: https://www.thetimes.co.uk/article/tax-rises-on-higher-earners-will-not-bring-extra-revenue-ifs-warns-xfhtszbp5L
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