Title: What are Tariffs? | Who Bears the Burden of Tariffs?
Headings: Tariffs
Tariffs
What Is a Tariffs?
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Content: Tariffs are trade barriers that raise prices and reduce available quantities of goods and services for U.S. businesses and consumers. Expand Definition
How do tariffs work? Tariffs are paid when a good or services is imported into a country. If a car manufacturer imports engines that are then used in vehicles, then tariffs on those imported engines will increase the production cost and the cost to the consumer. The costs of tariffs result in higher burdens on international trade which can harm production. 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.