It could be a powerful demonstration that taxes on businesses do not necessarily lead to greater unemployment and higher prices for consumers, or that the relationship between the two is less tightly paired than is commonly assumed.

There is an assumption, that is wrong, that all or potentially most of tarrifs will be paid by consumers. But people and businesses are smart and profit seeking – they will find ways to avoid tarrifs. Some consumers might just buy less or none of products with tarrifs. Some importers might eat some of their profits to remain competitive. Others my onshore manufacturing of their products. Truth is the cost of tarrifs won’t be borne solely by consumers.

We have seen this many times in the past when it comes to regulatory costs put on businesses by the government. Businesses find ways to comply for less than the full cost. Businesses do inevitably pass some of the costs to consumers but it’s rarely a one to one relationship. Prices have gone up to cover pollution control efforts at factories but consumers rarely pay for the full cost of cleaner air.

If the tarrifs prove to be successful – in the sense they promote domestic economic growth and at the same time raise revenues for the government at a discount – it may very well pave the way to a national carbon tax. If only the oil and coal companies pay the tax and only partially pass the cost onto consumers, while encouraging switching to lower carbon energy, it’s a win for the taxpayers and the environment. It’s possible we could get substantial reductions in emissions by taxing carbon but only minimally hurting jobs and consumers.

We don’t know for sure, but tarrifs are an exciting economic experiment that if they work could forever change tax policy and create an economy that is not only greener but also less taxing on ordinary citizens. Sure there will be losers under any tax, but targeted taxes on harmful industries might raise a lot of revenues while families and workers only pay a fraction of the cost.