Tariffs are taxes imposed on imported goods by a government or a supranational union. They can also be applied to exports in some cases. The primary purpose of tariffs is to generate government revenue and regulate trade, often protecting domestic industries. There are four main categories of tariffs:

– Ad valorem tariffs: These are calculated as a percentage of the value of the goods. For example, a 20% tax might be placed on $100 worth of goods.
– Specific tariffs: These are fixed fees based on the quantity of goods. For instance, there might be a tariff of $5 per kilogram of imported sugar.
– Compound tariffs: These combine specific and ad valorem duties on the same imported goods, calculating the total tax based on both. For example, a country might impose a tariff of $5 per liter plus 10% of the value of imported wine.
– Mixed tariffs: These apply either a specific duty or an ad valorem duty based on predefined conditions. For instance, for imported trucks, a country might charge either $5,000 per vehicle or 15% of the vehicle's value, whichever is greater.

The aim of tariff policies is to influence international trade flows, protect domestic industries, and respond to unfair practices by foreign countries. When a tariff is imposed on an imported good, it increases its cost, making domestically produced alternatives more attractive to consumers based on price.

In the United States, the Trump administration utilized reciprocal tariffs as a significant tool to influence trade policies of other countries. Reciprocal tariffs are trade duties imposed in retaliation to tariffs or barriers set by another country. This policy is designed to correct trade imbalances and safeguard domestic industries.

The Trump administration's reciprocal tariff policy was rooted in addressing perceived long-standing trade imbalances and unfair treatment by global trading partners. By applying reciprocal tariffs at rates roughly half of those imposed by other countries, the administration aimed to pressure nations to lower trade barriers or renegotiate trade deals. While this policy garnered support from domestic manufacturers and labor groups for attempting to rebalance trade and support American industry, it also faced criticism from economists and international allies who viewed it as protectionist and potentially destabilizing to the global economic system.

Tariffs can have far-reaching implications, as seen in the US-China tariff war that began in 2018. This conflict between the world's two largest economies had significant impacts on global supply chains, inflation, and geopolitical dynamics. The trade war signaled a structural shift in trade policy and highlighted the

Source: https://cointelegraph.com/explained/tariffs-explained-how-they-work-and-why-they-matter?utm_source=rss_feed&utm_medium=rss&utm_campaign=rss_partner_inbound