The Scoop on Trade Tariffs
The Scoop on Tariffs
Let’s talk about trade tariffs. What are they? Are they good or bad? Why are tariffs used? How do they impact you, the consumer?
Tariffs are
basically a tax on imported products, charged to the seller. Tariffs (taxes) are generally targeted toward entire industries - Canadian wood or Japanese automobiles, for example.
Profit margins are rarely high enough to absorb the tariff(tax) without passing on at least some of the expense to the consumer. As a result, imported products affected by tariffs usually become more expensive. The higher costs of these products leads to lower sales and lower profits for the affected companies. If the tariffs remain in place long enough, it will lead to job losses to the companies involved in the exporting.
Common Reasons Tariffs are Applied:
- Encourage consumers to buy locally made products instead of imports
- To influence the other countries on political issues unrelated to trade
- To raise tax revenue
Are Tariffs good or bad? It depends. If you are the one paying the tax, grrrr! If you are the one receiving the tax, yay!
In a world where most large companies produce and sell their products in other countries, tariffs can benefit some companies, while harming others. Many well known American brands actually manufacture most of their products overseas. Those Levi’s jeans you are wearing were likely made in China or Mexico. The Ford F-150 your neighbor loves so much is 68% foreign made. This means that those “big beautiful tariffs” often harm American companies.
What can foreign countries do to protect themselves from tariffs?
If the foreign country is a consumer of products from your country, they often respond with tariffs(taxes) of their own. This can quickly escalate into an all out trade war.
Strategically, one way a country can reduce the risk and harm tariffs cause, is to export their products to a wide range of countries, minimizing their reliance on consumers in any one country. If 70% of your sales are to consumers in a single country, you are going to be heavily burdened if that country decides to Tariff(tax) your products. You may even be forced to concede to unrelated political demands of a country in order to protect your sales there.
What can companies do to protect themselves from tariffs?
Companies can manufacture their products in their home country or spread out their international manufacturing to multiple countries, minimizing the impact of tariffs against any one of them. If 70% of your products are made in a single foreign country, you are going to be heavily burdened if your country decides to Tariff(tax) imports from that country.
Economists generally agree that tariffs are an inefficient way to raise tax revenue. Per taxfoundation.org, “Economists generally agree free trade increases the level of economic output and income, while conversely, trade barriers reduce economic output and income. Historical evidence shows tariffs raise prices and reduce available quantities of goods and services for US businesses and consumers, resulting in lower income, reduced employment, and lower economic output.”
If you’d would like to read more, consider the articles below.
https://www.pbs.org/newshour/economy/5-things-to-know-about-tariffs-and-how-they-work
https://www.consumerreports.org/cro/magazine/2013/02/made-in-america/index.htm
https://www.carscoops.com/2025/03/how-much-of-your-car-is-really-made-in-the-usa/
https://itimanufacturing.com/american-products-manufactured-overseas/