The Question of Tariffs

Tariffs are a big topic of discussion this election year with many conflicting assertions made about how they work and who pays for them. I did a little research to see if I could find the facts amongst the noise.

When a US company imports a foreign good it is required to submit a customs declaration to U.S. Customs and Border Protection (CBP), including the value of the product and country of origin.

The importer (not the exporter) then applies the tariff rate for the goods according to the Harmonized Tariff Schedule of the United States (HTSUS), calculates the amount of the tariff, and pays it directly to the U.S. Customs and Border Protection (CBP).

There are several potential effects of a new tariff. For example, if a company is importing a component of a product they sell, they will need to find an alternative source or raise the price of their end product. If a company is simply importing and reselling a finished product, the same would apply: they either find a cheaper supplier or raise the price to the consumer. In both cases, the cheaper supplier could be American, or could be in another country not subject to the tariff.

As is well known, Trump imposed many tariffs during his term and is now proposing tariffs of 20% on nearly every product we import. Biden has maintained most of the Trump tariffs and also imposed some additional ones on things like imports of Chinese cars. Oddly, Trump continues to argue that foreign countries pay us tariffs. Clearly, this is not the case.