Since Donald Trump became president in January, the term tariffs dominates the head news. But what exactly are tariffs?
Tariffs are taxes paid by firms importing goods internationally. They are used as a tool to control global trade
Tariffs, sometimes called duties or customs duties, are taxes on goods that are traded between nations. When goods cross the US border, Customs and Border Protection (CBP) collects tariffs based on the type of goods, their quantity, and which country they’re coming from.
Why do countries use tariffs?
Tariffs are a way for countries to control international trade. By artificially raising the cost of importing goods, tariffs can incentivize would-be importers to instead purchase goods from domestic sellers, potentially strengthening the local economy.
Politics can also play a role: governments can adjust tariffs to exert economic leverage over political rivals or retaliate against other tariffs or economic sanctions.
Tariffs also generate revenue for importing countries, though in developed countries and in today’s global economy, they tend to be used more to achieve foreign policy goals than financial ones.
Who pays for tariffs?
In a literal sense, companies that are importing goods from international trade partners pay the tariff fees to CBP at the port of entry within 10 days. But as an economic policy, tariffs have implications beyond the money exchanged at the border.
According to the Bureau of Labor Statistics (BLS), this indirectly raises domestic prices on goods as supply-and-demand forces often push the burden onto consumers in the importing country.
How much revenue do tariffs generate?
The US brought in $77 billion in tariffs in 2024, according to the Congressional Budget Office (CBO). This was down from a historically high period after revenue from tariffs more than doubled from 2017 to 2022.
This total accounted for 1.6% of federal revenue. Since the 1960s, duties have not made up more than 2.0% of total revenue.
Source: USA FACTS