Who pays the tariff?
Consumers in the importing country ultimately pay most of the tariff through higher prices.
tar·iff
/ˈter.ɪf/
noun: a tax or duty to be paid on imports or exports.
Example
Imagine the USA decides to put a 20% tariff on Canadian maple syrup.
- Price Increase: When Canadian syrup costs $10 per bottle, the tariff adds $2 (20% of $10). So, the price in the USA becomes $12.
- Less Buying: American customers might buy less maple syrup because it's now more expensive.
- Cheaper Alternatives: People might choose other sweeteners like honey or corn syrup instead.
- Canadian Sellers: Canadian producers earn less because fewer bottles are sold at the higher price.
- USA Benefits: The tariff can protect American syrup makers from Canadian competition, helping them sell more.
In summary: A tariff makes imported maple syrup more expensive, leading to fewer purchases and helping local producers, but consumers pay more and have fewer choices.