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What are Tariffs?

Tariff is a fee (Tax) that government charges on goods that are coming into the country from another country. For example: If USA imports shoes from china and the shoes cost $100, but then the USA government puts a 20% tariff on them, then the shoes will now cost $120 when it arrives in the USA. Now the business needs to charge at least around $140 on the shoes to cover the tariff tax and make profit.

Who pays the Tariffs?

The importers pays the tariff. The company that brings the product into the country pays the tariff to the government.

How does this affect people of the country?

Well in order to stay profitable, the importer will then raise the price of the goods when selling them to retailers or customers. So in the end people will end up paying more at the store.

Who benefits from tariffs?

Local businesses that don’t require any importation will benefit because their prices will be lower compared to those who import. The government will also make a lot of money due to high tariff charges.

How do tariff affect the economy?

1: local businesses or industries have a better chance to grow or make more profit without undercut by cheaper foreign products.
2: Government Revenue increases because more tax or higher tax means more money to the government.
3: encourages local productions, due to high tariffs, more companies and investors will end up investing in starting their own companies to avoid paying a lot of tax.

The negative side of tariffs on economy.

1: higher prices for consumers: people will end up paying more for imported goods (things that comes from other countries)
2: Trade wars: like what’s happening with USA and China, countries will end up fighting back with their own tariffs, and this will cause damage to exports and imports businesses and economies.
3: less variety: less imports may result in less choice and low goods quality for people of the country.

Summary:

Tariffs will benefit government and local businesses only. However, it will hurt businesses that rely on import and as well as the people of the country because now they will pay more.

Credit: the source

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