A word that’s come up frequently in recent headlines: tariffs.
But what are tariffs?
The best way to describe tariffs, in layman terms, are taxes on products imported into a country.
The Two Types of Tariffs
Ad Valorem – Ad Valorem tariffs vary depending on the value of the product. For instance, the value of a car rises, so does its tariff.
Specific – Specific tariffs are flat tariffs on products. This can include a bushel of wheat.
In 2018, the Trump Administration imposed several tariffs on imported goods including, aluminum, frozen seafood, plastics, and steel.
Why Are There Tariffs?
There are several reasons to place tariffs on products coming into the United States from foreign countries. Some reasons cite by the Trump Administration include protecting domestic companies and consumers, along with for national security reasons.
Countries that disagree with being slapped with a new tariff usually will respond by imposing a retaliatory tariff.
When new tariffs are put in place on a country’s products, they have to pay more money to sell that product in the United States. This can create a trickle-down effect to consumers.
“What will tend to happen in any case is that the cost of providing the good is going to increase to the seller, higher than it would’ve been before,” said Christopher Westley, professor of economics at Florida Gulf Coast University. “And then the seller then requires a higher minimum price necessary to sell the good in the first place.”
Additional reporting by Anna Kohls