Title: What are Tariffs? | Who Bears the Burden of Tariffs?
Headings: Tariffs
Tariffs
What Is a Tariffs?
Was this page helpful to you?

Content: Many businesses have supply chains that cross multiple borders, and each border that is crossed could result in higher costs due to tariffs. Who bears the burden of tariffs? While tariffs are often described as a tax on foreign businesses, the costs are often borne by consumers in the country that is imposing the tariffs. Tariffs directly increase the cost of domestic sales by artificially increasing the price on imports. The distributional effects of a tariff (the economic burden it places on households across income levels) tend to be regressive, burdening lower-income households more than higher-income households. Tariffs are taken out of business revenue before it is distributed as compensation to factor inputs (workers and capital). This creates a wedge between what workers and capital produce and the amount they receive; in other words, a wedge between the consumer price and the producer price. Tariffs ultimately fall on the factors of production and reduce taxpayer labor and capital income. This occurs either by raising prices or reducing wage and capital income.