Since Donald Trump took office in January, the term tariffs has dominated the headlines. But what exactly are tariffs?
Tariffs are taxes paid by companies that import goods internationally. They are used as a tool to control global trade.
Tariffs, sometimes called duties or customs duties, are taxes on goods traded between nations. When goods cross the U.S. border, Customs and Border Protection (CBP) collects tariffs based on the type of goods, their quantity, and the country of origin.
Why do countries use tariffs?
Tariffs are a way for countries to control international trade. By artificially raising the cost of importing goods, tariffs can encourage potential importers to buy goods from domestic sellers, potentially strengthening the local economy.
Politics can also play a role: governments may adjust tariffs to exert economic leverage over political rivals or retaliate against other tariffs or economic sanctions.
Tariffs also generate revenue for importing countries, although in developed countries and the current global economy, they tend to be used more to achieve foreign policy objectives than financial ones.
Who pays for tariffs?
In the literal sense, companies that import goods from international trading partners pay the tariff fees to CBP at the port of entry within 10 days. But as economic policy, tariffs have implications beyond the money exchanged at the border.
According to the Bureau of Labor Statistics (BLS), this indirectly raises domestic prices of goods, as supply and demand forces often shift the burden to consumers in the importing country.
How much revenue do tariffs generate?
The U.S. collected $77 billion in tariffs in 2024, according to the Congressional Budget Office (CBO). This represented a decline from a historically high period, after tariff revenue more than doubled from 2017 to 2022.
This total represented 1.6% of federal revenue. Since the 1960s, duties have not accounted for more than 2.0% of total revenue.
Source: USA FACTS