Tariffs

Categories: Econ, Tax

Ut oh—it’s tariff time. Tariffs have a way making things awkward between countries. A tariff is a tax on an import (or export) between different countries (or other borders).

What’s all the tariff riff-raff about? Tariffs can be used to try to artificially affect the global market by making importing or exporting certain things more expensive than they would be otherwise. This can help artificially (in the economic sense) prop up industries.

Yet, tariffs aren’t that simple. For instance, the Trump admin put a 25% tariff on steel and a 10% tariff on aluminum imports, with some exceptions. This was great for American steel and aluminum producers. They used to have to compete with cheaper, imported steel and aluminum, but now that the imported stuff was more expensive, it became easier for them to sell their steel and aluminum to other U.S. businesses.

Which gets to who it wasn’t great for: those other U.S. businesses. Business who rely on a steady stream of cheaper, imported steel and aluminum all of the sudden experienced a price hike, dramatically affecting their businesses. Who else is paying? American consumers. The businesses who have to pay more money for steel and aluminum will pass that extra cost onto consumers, making a ton of goods more expensive than the used to be. To decide the effects you want out of a tariff, one must look beyond the immediate effects and to the secondary and tertiary effects to get the full picture.

Like we said—ut oh.

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