how do tariffs on exports work. The R’s are saying increased tariffs won’t cause manufacturers/distributors to pass the costs onto consumers here in the US. I was wondering if American manufacturers follow that same model. Are goods exported to foreign countries outside the US subject to tariffs, and are those tariffs absorbed, or passed onto foreign consumers?
In: Economics
Tariffs are taxes on imported or exported goods. They are traditionally used to protect domestic industries.
For example you could charge a tariff on foreign made cars, this makes their price artificially higher encouraging people to buy domestic cars which are now cheaper by comparison. This helps create and protect jobs in your country and reduces dependence on foreign goods.
The problem is that countries really don’t like it when you do that and often implement their own *retaliatory tariffs*. Japan for example might respond to a US tariff on cars by charging a tariff on US made goods encouraging Japanese citizens to buy domestic or European made goods instead.
This gets interesting when another country controls the raw materials. Canada for example could retaliate to proposed Trump tariffs by charging tariffs on metal and wood exports, badly hurting the US economy in the process.
This then hurts US industries and consumers, and those industries put pressure on the US government to fix it.
Tariffs can also result in US based companies increasing prices on their goods due to shortages as imports slow, or because they know they can get away with raising prices compared to foreign goods.
Generally speaking tariffs are an important economic tool, but in a our global economy they cannot be wielded like a hammer to solve all of our problems.
Domestic industries can be supported instead with tax cuts and incentives to help them develop, grow, or lower prices. (although in practice this too tends to just lead to more profits in the hands of their shareholders)
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