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Trade And Tariff Facts

Trade And Tariff Facts

Tariffs are taxes on the end user. Trade is between individuals or companies. Trade is voluntary and will not happen if both sides are not happy with the outcome, whether one side or the other has tariffs or not.

How trade and tariffs work

Sure, suppliers pay them at the port, but it would be foolish to think that the seller is going to absorb that cost. Such costs are regained by increasing prices to the consumer.
  1. A country decides to place tariffs on products from another country.
  2. Products from manufacturers from that country are charged a tax, that is, a tariff.
  3. The manufacturer raises prices to cover the cost of the tariff, thus passing it onto the receiving countries' buyers.
  4. Thus, the tariff is a tax on the people of the country who levies it.

What if the other country has tariffs on your country's products?

Much is made of trade deficits and other countries "beating" us on tariffs when they place them on our products.
  1. Realize that the providers in your country will increase the end user price of the other country to cover those tariffs.
  2. Remember that trades are voluntary. No deal will be made if it does not benefit both parties.
  3. Attempting to balance the ledger by adding tariffs on the other country does not harm the other country or provider. It is only bad for the end user in your own country. You would tax your own people.
  4. It is never a good idea to use the government to solve issues in private enterprise. It only causes bigger government.

Why not just make all products in country?

That always sounds good, but it has been tried and has always failed.
  1. This is known as industrial policy and the first reason for rejecting it is that it involves government controlling industry.
  2. The method for doing this involves heavy tariffs known as punitive tariffs, on goods that our government seeks to have made in our own country.
  3. Again, it should be noted that the tariff is a tax on the citizen of the country which levels it.
  4. This removes choice from the consumers in the country.
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