If you have been following the news recently, you’ve likely heard about Donald Trump’s plans regarding tariffs for his future term. But what exactly is a tariff, and why does it matter?
A tariff is a tax that a government places on imported or exported goods. Imagine an American retail company wants to buy shoes from China to sell here; if each shoe costs them $30, and there is a 60 percent tariff—what Trump has proposed for Chinese imported goods— those shoes would now cost the company $48. This may not seem like much of a difference, but imagine they are buying $150,000 worth of shoes; that tariff means the company pays an additional $90,000.
To offset these costs, American companies often raise product prices, passing the expense to consumers. Trump believes tariffs will reduce reliance on imports and boost American production. However, many economists argue that tariffs ultimately do more harm than good.
