Tariffs are taxes imposed by a government on goods and services imported from other countries. They are usually expressed as a percentage of the value of the imported product, for example, a 10% tariff on a $10 product means an additional $1 charge
. The purpose of tariffs includes:
- Protecting domestic industries by making imported goods more expensive, encouraging consumers to buy locally made products
- Raising government revenue from imports
- Using tariffs as a tool of trade policy or political leverage against other countries
Tariffs are paid by the importer when goods enter the country. The importer may pass these costs on to consumers, resulting in higher prices for imported goods domestically
. There are two main types of tariffs:
- Import tariffs, charged on goods brought into a country
- Export tariffs, charged on goods sent out of a country, though these are less common and usually lower than import tariffs
Tariffs can be either:
- Specific tariffs: a fixed fee per unit of product (e.g., $500 per car)
- Ad valorem tariffs: a percentage of the product's value (e.g., 5% of the import's value)
While tariffs aim to protect domestic industries, they often raise prices for consumers and can negatively impact supply chains and economic efficiency. The burden of tariffs tends to fall more heavily on lower-income households, as they face relatively larger increases in costs
. In summary, tariffs are government-imposed taxes on imports designed to protect domestic industries, raise revenue, and influence trade relations, but they can lead to higher prices and economic distortions within the importing country.
