TARIFFSWhat Are Tariffs?

By Andrew Chatzky, Anshu Siripurapu, and Noah Berman

Published 24 June 2024

U.S. Presidents Trump and Biden have both turned to tariffs to support local industries amid economic confrontation with China. Here’s how these taxes work and how they’ve been used historically.


·  Tariffs are a form of tax applied on imports from other countries. Economists say the costs are largely passed on to consumers.

·  Countries have used them to protect domestic industries, such as agriculture and renewable energy, as well as to retaliate against other states’ unfair trade practices.

·  U.S. President Trump wielded tariffs more than any recent American president, particularly against China. President Biden has largely left these levies in place while imposing his own.

Countries around the world have long used tariffs, a tax on imports, to prop up homegrown industries by inducing citizens to buy goods produced domestically. After World War II, however, tariffs largely fell out of favor in advanced economies because they often lead to reduced trade, higher prices for consumers, and retaliation from abroad. 

President Donald Trump broke with this economic orthodoxy and imposed tariffs on hundreds of billions of dollars worth of imported goods from China and other countries in an effort to combat alleged unfair trade practices, reduce the U.S. trade deficit, and boost domestic manufacturing in the name of national security and U.S. economic competitiveness. President Joe Biden has left these tariffs in place, leading some experts to fear that they will become a permanent part of the U.S. trade landscape.

What Is a Tariff?
A tariff is a tax imposed on foreign-made goods, paid by the importing business to its home country’s government. The most common kind of tariffs are ad valorem, which are levied as a fixed percentage of the value of the imports. There are also “specific tariffs,” which are charged as a fixed amount on each imported good (for example, $2 per shirt) and “tariff-rate quotas,” which are tariffs that kick in or rise significantly after a certain amount of imports is reached (e.g., fifty thousand tons of sugar).

Tariffs can serve several goals. Like all taxes, they provide a modest source of government revenue. Several countries have also used tariffs to help fledgling industries at home, hoping to shelter local firms from foreign competitors. Some tariffs are also meant to address unfair practices that other countries have used to make their exports artificially cheap.