What is a tariff and who has to pay it?

What is a tariff and who has to pay it?

It has finally happened: President Donald Trump has redeemed his promise and imposed considerable tariffs on the three largest trading partners in the USA, Mexico, China and Canada.

background of the tariffs

Last year, these three countries exported $ 1.4 trillion to the United States, which is 40 % of all imports, according to the data of the Ministry of Commerce.

Details about the tariffs

From now on, all goods from Mexico and Canada are subject to an inch of 25 %, with the exception of Canadian energy goods. Goods from China have to pay an inch of 20 %. Since the affected countries have threatened retaliatory tariffs on the United States, Minister of Commerce Lutnick On Wednesday again Negotiations could indicate Mexican and Canadian products in terms of tariffs.

effects on the US economy

The tariffs that Trump linked to combating the fentanyl smuggling into the USA could increase the prices for goods considerably, while the economy is already unstable.

Who bears the costs of the tariffs?

Trump and members of his government have often dismissed concerns about the additional costs for US companies and claims that the foreign countries pay the tariffs. However, this is not entirely correct.

What is a custom?

A custom is a tax on goods that are imported from another country. This tax is usually determined as a percentage of the value of the imported goods and can vary depending on the country of origin and the type of products.

Who pays the tariffs?

US companies that import goods bear the tariffs in advance, in contrast to Trump's claims that the exporting countries cover the costs. The actual transactions take place on the 328 import cakes to the USA by the customs and border protection authority (CBP), including airports, railways, streets and ports.

At these import cakes, CBP collect customs fees from domestic companies that import the products. This fees are calculated based on the classification of the goods and their origin, explains Ted Murphy, a lawyer of Sidley Austin, who specializes in questions of customs conformity.

Payment options for tariffs

Many importers use the electronic payment system that automatically deducts the tariff from a certain bank account. Alternatively, the tariffs can also be paid once at the end of a month.

consequences for exporting countries

Although Trump is not entirely wrong, if he says that other nations indirectly pay the tariffs, it is important to note that companies that learn that they have to spend more for imports from a certain country may decide to look for new suppliers or, in Trump's ideal world, to move production to the USA.

The country's economy, the goods of which are documented with tariffs, can suffer from the loss of income, which can potentially lead to job losses. Exporting countries often do not accept tariffs without defending themselves.