The Briefing Room Explainer: What is a Tariff?
Jan 24, 2025
Dive into the world of tariffs and discover what they really are. Explore how they evolved from mercantilism to modern protectionism. Uncover the surprising truth that American consumers often foot the bill for these taxes. Delve into the tension between free trade and protecting local industries, as well as the impact of global competition. Historical insights reveal the complex economic effects of tariff policies during recent administrations. This discussion sheds light on current trade dynamics and their implications for the future.
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Tariffs as Taxes
- Tariffs are essentially taxes on imported foreign goods.
- They increase the price of those goods for consumers in the importing country.
Tariff History
- Historically, countries like Britain embraced free trade, while others like the US and Germany favored protectionism.
- Post-WWII, tariffs generally decreased until recently.
Who Pays Tariffs?
- Contrary to some claims, the cost of tariffs is borne by consumers in the importing country, not the exporting country.
- This cost manifests as higher prices, although some might be absorbed by lower profit margins.
