I have 0 maths or economy skills, so I do need it explained like I’m 5. They’re in the news a lot atm but I just don’t understand them
I have 0 maths or economy skills, so I do need it explained like I’m 5. They’re in the news a lot atm but I just don’t understand them
But what is a tariff? What does it do?
It is an extra charge on top of products from overseas that is paid to the government.
If you were a small island and you had farmers that can’t compete with grain from other countries, you could either subsidize them or have a tariff on grain from overseas. First would lower the price of produce they would make, so they can compete, second would raise the local price of overseas product so they can compete. Both are valid strategies in niche situations.
Thanks for that… tbh I’m neurodiverse so I need it broken down a bit simpler if that’s ok?
What does neurodiverse mean in this context
It’s the correct term for learning difficulty, eg dyslexia
Thanks!
Since the comment I replied to was deleted I willreply here.
Think of tariff as to mean an import tax, much like sales tax.
When you import something from another country, it needs to go through things like customs, etc. You have to fill out all the paperwork about what it is and where it’s going (if you’re using/selling it in the US or just middlemanning it somewhere else).
Part of that paperwork includes tariffs, a tax on the good you are importing. So, the importer has to pay the government that money in order for the product to legally come in to the country. The importer pays that cost, so the local purchaser pays that cost, so the consumer pays that cost. And each one of those (and likely many other) steps probably will add on a little extra for the trouble.
The hope is that encourages local production; even if it costs more to produce locally, when you factor in the cost of the tariffs to import, it might make sense to invest the cost to avoid the tariffs.
The troubles are:
Thank you so much for this simple breakdown! It makes sense now and im bookmarking the comment. Why do you think the government is putting these tarrifs in? The real reason, not what they’re telling people.
The cynical perspective is that it’s an attempt to consolidate wealth for the wealthy.
Basically, you drive the price up on everything and force the least able to bear the loss in revenue to give up and sell.
Elon Musk can afford to lose $11 billion, because he still has $200 billion left over and that is obviously more than anyone needs to keep afloat for a few bad years. The same goes for every billionaire and every multibillion dollar company.
deleted by creator
The big thing to realize is trump and his cult seem to think the exporter (country of origin) pays the tariff to the importing country’s government. Where it actually is paid by the person who imports the item passing the tariff to their government.
If you are in the US and buy a 24% tariffed item from another country you are responsible to pay your government that 24%.
Now imagine you manufacture cars here in the states, but of you 1000 need components to build that car 825 of them are imported. You have to pay for each of those taxes tariffs, increasing the cost of something manufactured here.
If US companies are making cars and selling them at 20,000 each and another country starts importing their cars for sale at 8000 a piece, the government can put a tariff on that country’s cars to bring the price equal to or more than the 20,000 the US companies sell for so the US companies don’t go out of business by being undercut. The problem is that the other country can retaliate with equal or more tariffs if we import products there.
Tariffs are designed to be used prudently and only in extreme cases which would damage the countries business by radically different pricing of similar products.
The ham fisted broad tariffs that Trump is doing don’t fit any tariff model or make any sense.
It’s an import tax on imported goods.
I’m the CEO of the Orange Company, an American company. I sell oranges for $1. It’s the winter and Florida has no oranges for me to sell. So I call up a business in South America and have them send me oranges, $1 million of oranges.
The Orange Company pays them $1 million. When the oranges arrive in the US, the US Federal government charges me a 10% tariff on my imported oranges - $100k. The Orange Company pays the US government a 10% tariff, or $100k, for importing $1 million of oranges.
I then sell my oranges to American consumers. Because my cost of goods went up, I can’t sell for $1 anymore. So I pass on the 10% increase in orange cost to my customers by selling oranges for $1.10.
That’s what a tariff is, how it works, and how it is effectively a sales tax.
A tariff is the price a foreign company has to pay to be allowed to sell their product in America. When the product normally costs $100 and the tariff is 20% then the company has to pay $20 to be allowed to sell their product. Those $20 go to the American government.
The importer pays it, not the foreign company.