Contrary to what some supporters of President Donald Trump claim and the President himself asserts, tariffs are not paid by foreign governments, but by the American people. Importers pay taxes on each part or whole product imported into the country. They then raise the price of goods to recoup the American people’s cost.

The increased cost is typically not 100%, at least at first. Many companies eat into their profits first. They slow hiring and increase layoffs. They avoid a full increase in prices passed on to consumers, but it comes at the cost of jobs or rates of return to shareholders invested in the companies. If the tariffs stay, prices will go up, consumer purchasing power will be reduced and the economy will become more inefficient and slower as time goes on.

Some argue tariffs are the elixir to redeem the bottom 80% of the economy as the upper 20% have prospered. The economic data show that the top 20% of income earners have been spending enough to keep the economy going while the bottom 80% have already pulled back. A tariff does not care whether one is in the upper 20% or the lower 80%. They will all be negatively impacted.

Tariffs arguably hurt lower wage earners more because companies would prefer to reduce workforces to save money rather than passing the full cost of tariffs on to consumers. So, when tariffs are used to help the working class, the working class gets hit hardest.

Housing prices increase because so much of what goes into building a home is imported. The alternative would be making stuff in this country, but that is another way to make those products more expensive due to domestic labor and production costs.

The solution to improving the lot of the bottom 80% is not tariffs, which have greater potential for harm than good, but a two-pronged approach that, thankfully, Trump’s team seems committed to.

First, we must reduce the size of the government. Every dollar spent buying a government bond is a dollar not spent in the private sector, whether on a stock purchase, an investment, or an employee hire. As the public sector grows, the private sector shrinks.

Many of the major corporations in the United States are beneficiaries of tax schemes that protect the big and prevent the small from growing. Regulators and Congress have passed laws and regulations that require companies that grow to certain levels to face new and more cumbersome regulations.

Most Americans work at small businesses, not Fortune 500 businesses, but federal laws and regulations benefit the Fortune 500 at the expense of the small. A basic example is in the ever-growing tech sector, where intellectual property rules are regularly used to stymie innovation. Software used to be governed under copyright rules, but now a growing body of patent laws drives up costs to small tech companies, which do not have the legal capacity to compete in an ever-increasingly litigious society.

Republicans in Congress could pass Congresswoman Kat Cammacks’ REINS Act, which would require affirmative congressional legislation to enact regulations that are determined to be overburdensome and costly on businesses.