What are tariffs

 

What are tariffs and how do they work?

Tariffs are taxes on goods traded between nations. They’re a way for countries to control international trade by artificially raising the cost of importing goods. Some tariffs can incentivize would-be importers to purchase from domestic sellers instead, potentially strengthening the local economy. The US adjusts tariffs based on trade agreements, political goals, and economic needs.

The US collected $77 billion in tariffs in 2024, making up 1.6% of federal revenue. Tariffs haven’t comprised more than 2.0% of total annual revenue since the 1960s.  Congress holds constitutional authority over tariffs but has delegated much of it to the president through legislation. Customs and Border Protection enforces tariff collections based on the type of goods, quantity, and country they come from.  As of October 2024, the average tariff rate for bringing goods into the US is 3.4%. However, it varies based on the product, cost, quantity, and relationship with the exporting country.  The US follows World Trade Organization rules that standardize tariffs across member nations, but 14 free trade agreements and special exceptions allow for lower rates with specific partners.  When the US raises tariffs, US companies importing international goods pay those tariffs. This can indirectly raise prices for American consumers.