This thoughtful question, submitted by a reader named Steve, was prompted by our last article on tariffs and their relationship to inflation, deficits, and the aviation sector. It’s a fair question—simple on the surface but layered with nuance beneath. Thank you, Steve, for asking what many others may have been thinking.

Before addressing Steve’s inquiry directly, it’s worth taking a step back to reexamine the so-called “Liberation Day” tariffs: What remains of them? What were they meant to accomplish? And—critically—who, if anyone, has actually been “liberated”?

Get Involved: Do you believe the Liberation Day tariffs were successful in their stated or implied objectives? Why or why not? Please share your thoughts in the comments below.

Who Has Been Liberated?

In our prior article, we offered a detailed explanation of what tariffs are and how they affect trade, costs, and inflationary pressure. Let’s now turn our attention to whether the implementation of these tariffs has achieved its intended—or implied—objectives.

Tariffs and the Deficit

One of the stated goals of the tariffs announced by the Trump administration was to reduce the U.S. trade deficit. But the belief that tariffs alone can reverse trade imbalances is fundamentally flawed. Trade deficits are not necessarily driven by foreign competition or unfair practices—they are often the result of deeper structural issues, such as a country’s lack of domestic manufacturing capacity or its reserve currency status.

The United States, for example, imports vast quantities of goods because it no longer produces many of the items Americans consume. When paired with the ability to print money that the world still accepts, this results in the U.S. purchasing more than it sells. Tariffs may marginally reduce imports from some countries, but they don’t fix the underlying issue: the U.S. is structurally reliant on foreign production.

Tariffs as a Negotiation Tool

Initially, the Liberation Day tariffs were applied broadly, even to countries with little or no tariffs on U.S. goods. This broad-brush approach confused many—why impose tariffs on allies or non-trading partners?

What became clear over time was that the administration’s primary target was China. The sweeping nature of the tariffs appeared to be an effort to cut off every conceivable “loophole” by which Chinese goods might enter the U.S. indirectly—via Vietnam, Bangladesh, Mexico, or elsewhere. Only after this intent was made explicit did tariffs begin to scale back for other countries. Still, the damage had been done: allies were offended, and the aviation industry—among others—was caught in the crossfire.

It’s important to reiterate that countries don’t pay tariffs. Businesses and individuals do. While governments may retaliate with their own trade measures, the immediate and lasting impact of tariffs is felt by importers, manufacturers, and ultimately consumers. Tariffs raise operating costs. And in industries like aviation, where margins are tight and global supply chains are essential, that impact is profound.

How Do Tariffs Raise Aviation Operating Costs?

Aviation is one of the most globalized industries in existence. Even a manufacturer as iconic as Boeing sources materials and components from dozens of countries. From avionics and landing gear to software systems and customer support operations, the aviation ecosystem is deeply enmeshed in international trade.

When tariffs are imposed on imported parts or services, the cost doesn’t vanish—it gets absorbed by U.S.-based firms at the border. Initially, these costs might be swallowed by manufacturers or airlines seeking to remain competitive. But over time, especially if the tariffs are seen as long-term fixtures, these costs get passed along the supply chain: from suppliers to manufacturers, then to carriers, and finally to passengers.

This ripple effect extends even to outsourced operations. An airline relying on Indian-based customer support or Bangladeshi IT services will face increased costs if tariffs apply to such service imports. In a sector that has only recently begun recovering from pandemic-era losses and continues to wrestle with recession symptoms, this additional burden can be damaging.

Even more concerning is the possibility that, despite the administration’s apparent pivot to targeting China alone, global supply chains remain complex and intertwined. Chinese goods can and do enter the U.S. through third-party nations. To address this, the administration has broadened tariff enforcement to those transshipment countries as well—countries with whom the U.S. trades extensively. The result: uncertainty, reduced sourcing options, and increased costs across the board.

So Who Was Liberated, Exactly?

While the intention behind “Liberation Day” tariffs may have been to reclaim economic sovereignty or rebalance trade, their immediate effects have been to constrain industries like aviation. Rather than liberating the sector, the policies may have shackled it with higher costs, reduced flexibility, and lower resilience in the face of global supply disruptions.

Yes, there is an argument to be made that tariffs can help develop domestic industries over the long term. But such industrial transformation takes years—if not decades—and requires massive investment, policy stability, and a strategic vision far more consistent than what we've seen thus far. In the meantime, the aviation sector, already facing recessionary pressure, will suffer the consequences.

The author maintains a general opposition to tariffs as economic tools. They may serve a purpose as negotiating leverage, but as long-term policy instruments, they tend to raise costs, reduce consumer choice, and dampen innovation. For a reserve currency country like the United States, the risks are compounded—printing money while restricting imports only ensures that inflation remains bottled up at home rather than exported abroad.

While some industries may benefit in isolated instances, the aviation sector is likely to face continued turbulence as a result of these trade policies. As always, we urge our readers to look beyond the headlines and understand the intricate, often unintended consequences of economic nationalism.

Conclusion: Tariff ‘Liberation’ Could Be an Aviation Setback

One month after Liberation Day, it is clear that the aviation industry was not among the liberated. Instead, it finds itself burdened by higher costs, constrained access to international suppliers, and elevated operational complexity. Far from being a catalyst for growth, the current round of tariffs may serve as a drag on recovery and a deterrent to innovation.

While protectionism might yield short-term political wins or symbolic victories against geopolitical rivals, it is the aviation professionals, manufacturers, and passengers who bear the long-term costs. In an industry where efficiency and global cooperation are not luxuries but necessities, these tariffs threaten to do more harm than good.

As the world grows more interconnected, insulating ourselves from the global market might feel like a bold stance—but in reality, it may leave our industries less competitive and our consumers poorer. The aviation industry, perhaps more than any other, reminds us that economic liberation is not achieved through barriers, but through bridges.

Thank you for reading this week's On Aviation™ full article. Do you believe the Liberation Day tariffs were successful in their stated or implied objectives? Why or why not? Please share your thoughts in the comments below. Remember to check out our On Aviation™ Podcast and continue the conversation on our Twitter and Instagram.

Orlando Spencer - On Aviation™

You might be wondering which of the above statements, often heard in the mainstream media, is actually correct. Unfortunately, as it relates to tariffs, inflation, and the question of whether tariffs are simply taxes and whether they cause inflation, the answer is far more nuanced than what pundits and talking heads typically offer.

The discussion around tariffs, inflation, and taxation has been dominating both mainstream and social media over the past several months, particularly following the election victory of Donald J. Trump as the 47th President of the United States. These conversations have intensified with the announcement of executive orders—set to go into effect on April 2, 2025—that will apply reciprocal tariffs to all nations imposing tariffs on the United States. As noted, the relationship between tariffs, taxation, and inflation is multifaceted. While opinions vary between optimism and pessimism, what remains clear is that we must ask some key questions regarding how these dynamics affect the economy, the individual, and the aviation industry in particular.

Get Involved: Do you believe that there will be negative consequences of reciprocal tariffs? If so, what could those consequences be? Please share your thoughts in the comments below.

What Are Tariffs?

Many 21st-century citizens in developed economies, especially in the U.S., often misunderstand what tariffs actually are. Simply put, tariffs are a form of excise tax applied at a country’s border on imported goods. These taxes are paid not by the country exporting the goods, but by the consumers within the importing country. For example, if Country A imposes a 10% tariff on imports from Country B, it is the consumers in Country A—not Country B—who pay the tax when they purchase those goods.

However, things get more complex when factoring in economic leverage. If the market of Country A is strong enough, exporters from Country B might lower their product prices to remain competitive after the tariff is applied. This is one argument presented by the current U.S. administration. Yet, this strategy is less likely to succeed today than it may have in the past, as nations like China, Russia, and India (key BRICS members) now represent large alternative markets.

Historically, tariffs were once the primary means of raising revenue for the U.S. federal government. Before the 16th Amendment of 1913 introduced income taxes, tariffs were the government’s main tax tool. Ironically, many Americans once supported income taxes in hopes that tariffs would be eliminated—a promise that was never fully realized.

As economist Murray Rothbard explained, tariffs restrict interregional trade, force inefficient allocation of resources, and ultimately reduce consumer welfare by enabling domestic producers to charge monopoly prices. When trade is blocked, more productive foreign firms are excluded, and domestic consumers are left with fewer and costlier options.

“Tariffs and various forms of import quotas prohibit, partially or totally, geographical competition for various products… They also injure the more efficient foreign firms and the consumers of all areas.” —Murray N. Rothbard, Power and Market (2006)

Do Tariffs Cause Inflation?

To answer this, we turn to Nobel Laureate Milton Friedman, who famously stated: “Inflation is always and everywhere a monetary phenomenon.” In other words, inflation is not caused by tariffs or taxes—it’s caused by the expansion of the money supply.

Inflation occurs when a central bank increases the money supply, either through direct money printing, asset purchases (monetizing debt), or enabling private banks to expand credit. While tariffs can raise the price of specific imported goods, they do not cause a general rise in prices across the entire economy. Therefore, tariffs are not inflationary in the macroeconomic sense.

However, there is a potential caveat for countries that issue a global reserve currency, such as the United States. If broad-based tariffs reduce foreign demand for U.S. dollars, then those dollars—normally used abroad—may remain within the domestic economy. This increased money supply at home could theoretically contribute to inflation. This concept, still under development by the author, may merit further exploration within contemporary monetary theory.

Will Tariffs Affect the Aviation Industry?

The answer is a resounding yes. The aviation industry relies heavily on global supply chains for parts, raw materials, maintenance equipment, and aircraft components. If broad-based tariffs are imposed, the cost of operations for airlines, aircraft manufacturers, and service providers will rise—at a time when the industry is already grappling with recessionary pressures.

Southwest Airlines, long considered one of the most financially resilient carriers, recently announced its first major workforce reduction in over 50 years. This development is a harbinger of broader distress in the industry. As operating costs rise due to tariffs, we may see more layoffs, bankruptcies, or route cuts, particularly from smaller or budget airlines.

Supporters of tariffs argue that such policies give domestic manufacturers the room to grow. While this may be true in theory, rebuilding an industrial base comparable to what the U.S. had in the 1960s and 1970s would take years—possibly decades—and would involve considerable economic pain in the short term.

From a free-market perspective, the better path would be to focus on comparative advantage: produce and export what we do best and import what we do not. Unfortunately, protectionism currently seems to be the political flavor of the day.

Conclusion: Tariffs, Inflation, and the Future of Aviation

As the global economic landscape shifts, discussions about tariffs and inflation have become central to both public policy and business strategy. While tariffs do raise the price of imported goods, they do not inherently cause inflation. Inflation remains a monetary issue—driven by central bank policies and money supply expansion.

The aviation industry, due to its reliance on international supply chains, will likely face higher operating costs from broad-based tariffs. While this could potentially spur domestic manufacturing over the long run, the immediate consequences may include recessionary pressures, reduced airline profitability, and rising consumer fares.

As we move forward, it is imperative that policymakers adopt strategies rooted in sound economic reasoning rather than populist protectionism. Tariffs can be useful tools under specific circumstances, but they are not panaceas. As with any economic policy, their costs, benefits, and unintended consequences must be carefully weighed.

Thank you for reading this week's On Aviation™ full article. Do you believe that there will be negative consequences of reciprocal tariffs? If so, what could those consequences be? Please share your thoughts in the comments below. Remember to check out our On Aviation™ Podcast and continue the conversation on our Twitter and Instagram.

Orlando Spencer - On Aviation™

References

Investopedia. (2025, February 13). What Is a Tariff and Why Are They Important? https://www.investopedia.com/terms/t/tariff.asp

Rothbard, M. N. (2006). Power and Market (4th ed.). Ludwig von Mises Institute.

[A version of this article was originally published in the Bank Directors Association of Nigeria Directors Magazine, 6th Edition.]

The recent fervor surrounding the NetZero initiative, aimed at achieving net-zero emissions, represents a major shift in global environmental policy. While this initiative has gained widespread support from governments, NGOs, and private industries, it is crucial to scrutinize its underlying assumptions and broader implications.

While the stated goal of climate change mitigation is undoubtedly important, the policies supporting NetZero carry significant economic and societal costs that are often overlooked in mainstream discussions. This article provides a critical analysis of the NetZero agenda, examining both its economic impact and its real-world feasibility.

Get Involved: Do you believe the NetZero initiative is being implemented effectively, or do you think a more market-driven approach would yield better results? Please share your thoughts in the comments below.

The Economic Cost of NetZero

The economic consequences of the NetZero initiative are wide-ranging and deeply impactful. One of the most controversial aspects of the initiative is the implementation of carbon taxes, which are promoted as an effective method for reducing carbon emissions. However, studies indicate that carbon taxes disproportionately impact lower-income households, leading to net income losses rather than economic benefits.

Further complicating matters, the transition to sustainable energy sources has led to increased production costs across various industries. The push for renewable energy mandates—coupled with strict regulations—has forced companies to adopt expensive technologies while struggling to remain competitive in a global market. As a result, consumers ultimately bear the financial burden through higher energy costs and increased prices for goods and services.

In essence, while NetZero policies aim to address climate concerns, they introduce economic strains that raise questions about their long-term viability and sustainability.

The Societal and Industrial Impact

The NetZero movement is not just an economic challenge—it has far-reaching effects on society, employment, and industry. The transition to renewable energy has led to disruptions in traditional energy sectors, with industries such as oil, gas, and manufacturing experiencing significant job losses.

Moreover, governments have been aggressively pushing for electrification mandates, including the forced adoption of electric vehicles (EVs) and green infrastructure projects. While these policies are intended to reduce emissions, they fail to account for the infrastructural shortcomings and energy limitations that make such transitions highly impractical in the near term.

Additionally, the production of EV batteries and renewable energy components relies heavily on rare earth minerals, leading to environmental concerns and geopolitical tensions. Mining operations in countries such as China and the Democratic Republic of the Congo have been criticized for environmental degradation and human rights violations, raising ethical dilemmas regarding the so-called “green” transition.

Thus, while NetZero policies promote sustainability, they inadvertently create new challenges that must be carefully evaluated before widespread implementation.

The Problem of Regulatory Overreach

One of the biggest criticisms of the NetZero initiative is government overreach in the form of excessive regulations. In many cases, government-imposed sustainability mandates have resulted in negative economic consequences, rather than the intended benefits.

For example, the European Union’s ReFuelEU initiative mandates the use of Sustainable Aviation Fuels (SAF) and bans fuel tankering—a practice used by airlines to optimize fuel costs. However, SAF is 250% more expensive than conventional jet fuel, drastically increasing operational costs for airlines and ticket prices for consumers.

Similarly, in the United States, regulatory bodies like the EPA and the Department of Energy have introduced stricter emissions standards that place burdens on industries while offering minimal incentives for innovation. The NetZero framework, rather than encouraging voluntary adaptation, has taken an authoritarian approach, forcing industries to comply at the expense of economic growth and competitiveness.

These regulatory burdens disproportionately impact small and medium-sized enterprises, which lack the financial resources to comply with expensive sustainability requirements. As a result, the NetZero agenda may ultimately benefit large corporations and government-subsidized industries, while harming independent businesses and working-class individuals.

Conclusion: A More Pragmatic Approach to Sustainability

The NetZero initiative, though well-intentioned, presents significant economic, societal, and regulatory challenges that cannot be ignored. While climate change mitigation is a worthy goal, the current approach fails to account for economic realities and logistical constraints.

A more balanced strategy would focus on encouraging market-driven innovation rather than forcing compliance through excessive regulations. The transition to renewable energy should be gradual and carefully managed, ensuring that affordable energy solutions remain accessible for both consumers and businesses. Instead of relying on punitive measures such as carbon taxes, which disproportionately impact lower-income populations, policymakers should consider investment in diversified energy portfolios, including nuclear power, hydrogen technology, and improved fossil fuel efficiency.

Ultimately, sustainability efforts must be rooted in economic pragmatism rather than ideological mandates. The path to a cleaner future must not come at the expense of economic stability, job security, and individual freedoms. By prioritizing technological advancement and private sector engagement, a more effective and sustainable approach to reducing emissions can be achieved.

Thank you for reading this week's On Aviation™ full article. Do you believe the NetZero initiative is being implemented effectively, or do you think a more market-driven approach would yield better results? Please share your thoughts in the comments below. Remember to check out our On Aviation™ Podcast and continue the conversation on our Twitter and Instagram.

Orlando Spencer - On Aviation™

References

Spencer, J. (2021). The Economic Realities of Carbon Taxation. Economic Policy Journal.

European Commission. (2025). ReFuelEU Aviation – Sustainable aviation fuel initiative. Retrieved from https://transport.ec.europa.eu/transport-modes/air/environment/refueleu-aviation_en

U.S. Government Accountability Office. (2024). FAA Actions Are Urgently Needed to Modernize Aging Systems (GAO-24-107001). Retrieved from https://www.gao.gov/assets/gao-24-107001.pdf