Q: I’ve been seeing things about Trump’s new tariffs on steel and aluminum. What’s a tariff?

tariff_reform_poster.jpg

Q: I’ve been seeing things about Trump’s new tariffs on steel and aluminum. What’s a tariff?

A: Tariffs are just taxes on goods imported from other countries. You could call it a “customs duty,” an “import tax,” a “tariff,” or a “foreign product tax.” Governments sometimes impose tariffs in order to encourage domestic production in a particular industry. For example, Brazil wanted to cell phone manufacturers to set up shop in Brazil, so it put tariffs in place on smartphones. This had the effect of making Brazil one of the most expensive places in the world to buy a smartphone, and also led to a huge black market in smuggled phones. Or, like in the poster above, British grain millers would like tariffs on foreign grain, so their prices would be more favorable in comparison, and their business would increase.

Tariffs were the first type of tax in the U.S., and the only source of funding for the federal government before the income tax was introduced in 1913. Lastly, tariffs are just one type of trade barrier; trade barriers can also take the form of import quotas, import licenses, domestic subsidies, local content requirements, or other types of trade restrictions.

- initially published in the 3/18/2018 newsletter

 

Stephanie Lee