How exactly do tariffs work?published at 19:16 Greenwich Mean Time
In practical terms, a tariff is a domestic tax levied on goods as they enter the country, proportional to the value of the import.
So a car imported to the US with a value of $50,000 (£38,000) subject to a 25% tariff, would face a $12,500 charge.
The charge is physically paid by the US company that imports the goods, not the foreign company that exports them.
The question of where the final “economic” burden of tariffs falls, as opposed to the upfront bill, is more complicated.
If the US importing firm passes on the cost of the tariff to the person buying the product in the US in the form of higher retail prices, it would be the American consumer who bears the economic burden.
If the US importing firm absorbs the cost of the tariff itself and doesn’t pass it on, then that firm is said to bear the economic burden in the form of lower profits than it would otherwise have enjoyed.
Alternatively, it is possible that foreign exporters might have to lower their wholesale prices by the value of the tariff in order to retain their US customers.
