Lately, the word around town has been tariffs, tariffs, tariffs, and even more tariffs, but what are they, and what do they do?
Tariffs are taxes a government imposes on goods and services imported into or exported from a country. They have existed since ancient times, dating back to 2000 BC, and they were taxes on goods found along trading routes.
Now, tariffs are a symbol of diplomacy. They are used to influence trade relations among countries and can serve as retaliation against unfair trade policies.
For example, President-elect Donald Trump has recently proposed tariffs on certain countries should they not cooperate with his incoming administration. In early December, Trump announced his plan to place a 25% tariff on imports from Canada and Mexico.
According to Trump, the tariff will be implemented if Canada and Mexico fail to control the flow of illegal drugs and migrants into the U.S., showing that tariffs can be used as a threat in diplomatic relations.
Apart from being diplomatic armor, tariffs also serve as armor for domestic industries in a country. For example, the electric vehicle (EV) industry in the United States is protected from China’s EV industry by a 100% tariff on all Chinese EVs imported into the U.S.
In other words, it is not profitable for Chinese EV companies to sell their cars in the U.S. because they would have to double the price of their cars. Thus, fewer people will buy their cars in the U.S.
This protects the U.S. EV industry by making consumers buy from domestic companies such as Tesla, Rivian, and Polestar and not from foreign companies.
While protecting countries’ domestic industries, tariffs also serve as cash cows for countries. In countries like Barbados, Honduras, Pakistan, and Yemen, tariffs act as an important source of revenue.
These countries must rely on tariffs as their main source of revenue because they have no other forms of taxation, their geographical locations, and whether they are import or export-heavy. For example, most nations in the Caribbean need to impose tariffs to gain revenue since they import over half of what the nation consumes.
However, organizations like the World Bank, the International Monetary Fund (IMF), and the World Trade Organization (WTO) encourage developing countries that are tariff-reliant to diversify their sources of revenue to reduce their reliance on tariffs.
This is so countries can have a stable economy since tariff revenue is inconsistent and widen countries’ access to new markets, which can lead to stronger and more beneficial trade partnerships.
Working-class citizens oppose tariffs since they increase the price of the goods and services they consume and use. Therefore, in times when there is economic uncertainty like there is now, tariffs are even less appealing among citizens.
When asked about how she felt that soon, more tariffs might be imposed on commonly bought imports, Sophomore Aariyah Harris said, “I think the people in America could use a break. Everything is already so expensive, and adding tariffs on commonly bought imports will only make it worse.”
Now, in a world where the economy is uncertain and international cooperation is unstable, the question isn’t just how tariffs work but how they can work to improve our global problems.
