HISTORY OF TARIFFS
Tariffs in U.S. history can be found as far back as the Tariff Act of 1789, which was championed by Alexander Hamilton. The purpose was to promote trade and protect the growing American manufacturing industry, as well as raise substantial government revenue. With the dramatic increase of manufacturing in the late 1890s, coupled with the introduction of income taxes in the early 1900s, there was less of a need for high tariffs. After the 1929 stock market crash, the Smoot-Hawley Act of 1930 was enacted to protect businesses and farmers from economic calamity, and subsequently caused a dramatic reduction in trade between Europe and the U.S. Some economic experts felt this action exacerbated the economic downturn with the stock market crash. By the end of World War II, tariffs were substantially decreased and a global world trade grew. This year, the U.S. employed a new wide range of tariffs with the goals of bringing manufacturing jobs back, retaliating against other nation’s tariffs, reducing the theft of intellectual property, and balancing overall trade with other countries. The question is, how might this affect higher education?
EFFECTS ON HIGHER ED
The educational sector has already been going through a period of reduced government funding, higher costs, staffing shortages and the lasting effects of the pandemic. In addition, corporations began recruiting technologists from higher education jobs with attractive salaries and the ability to work remotely. Educational institutions have found it increasingly difficult to hire and retain their staff. Larger institutions with more financial independence could better handle these funding and staffing shortages, but smaller, financially strapped colleges had much more difficulty. With the introduction of tariffs in early 2025, higher education could experience a whole new set of challenges, including further governmental budget and program cuts, less public support and higher expenses.
As a trade war between China and the U.S. was heating up, prices for many items were set to increase. This has the potential of causing universities and colleges to reallocate resources, prioritize essential services and pause new initiatives. While there currently is a pause in the highest tariffs between the two countries, global uncertainty still exists. The unintended consequences of tariffs on higher education can be seen by straining budgets, increased tuition, and reduced research. Colleges may have to turn to endowments for additional funding. In a column earlier this month for the education consultant Ivy Scholars, titled “Are Tariffs Going to Impact College Expenses?” Sasha Chada pointed out that when tariffs cause stock market instability, it affects the endowment’s principal. Chada wrote, “When this happens, universities must either dip into the principal of the investments or look for alternate sources of revenue.”
TECH INDUSTRY AND HIGHER ED
As higher education technology budgets are further strained, it may become extremely difficult for them to pay for infrastructure and critical services, including cybersecurity and artificial intelligence. Universities need to carefully prioritize their technological investments. For tech companies, these increased costs for higher education could translate into less purchases of IT support and consulting, software licenses and hardware upgrades. Could higher education decide to reduce their use of Microsoft Azure services? Would there be less hardware purchases of Dell and Apple? Could there be less investments in cyber protection or AI development?
Universities which have large research-based footprints may experience prohibitive costs for imported materials and equipment, and the overall costs for research may continue to skyrocket. This may also dilute the ability for higher education to create and maintain domestic and international partnerships, and cause project delays or outright cancellations.
THE RIPPLE EFFECT
Beyond technology purchases, tariffs can create collateral damage to other university costs. Each year, colleges need to consider construction purchases, building furnishings, tuition and other segregated costs. As these costs continue to rise, future tuition revenues continue to decline. Universities and colleges may need to delay purchases and renegotiate contracts. Coupled with sweeping layoffs and closed offices within the U.S. Department of Education, there is an increased potential for a dramatic reduction in the available graduate pool. As Kathryn Palmer of Inside Higher Ed wrote in April, “Deep cuts to federal research funding and crackdowns on international students could mean far fewer graduate students next fall and beyond. If that happens, undergraduates, faculty and research productivity would all suffer.” Reducing the number of students trained in technology and research could negatively impact businesses that rely on these critical skills.
HIGHER ED'S BENEFIT TO BUSINESS
While some experts feel tariffs can be a helpful economic bargaining tool, it's important for our leaders to see higher education as an economic driver for the U.S. The education sector can help stabilize and increase investment in domestic technology companies. It can also provide critical research in innovation of AI and cybersecurity, making the U.S. much more strategically competitive in a global economy. With proper investments, higher education could be an economic engine that mitigates some of the downward risks of tariffs, while at the same time growing the U.S. economy, putting it in a much stronger position.
