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Animation explains who ends up paying for tariffs

Posted at 1:58 PM, Nov 15, 2019

One claim about tariffs is that China will pay them, not America. But experts say the U.S. does shoulder part of the burden.

A tariff is basically a tax on an imported product. It gets a little more complicated from there.

As an example, let’s say there’s a 10% tariff on a shipment of lithium ion batteries from China. If the shipment costs $100, whoever’s importing the shipment will pay $110 to get it into the U.S.

That money goes to the U.S. government.

Leaders sign off on paperwork that says the tariff is paid.

But what happens to that extra cost the importer had to pay? In some cases, it gets passed onto the customer in the form of higher prices. In other cases, the importer absorbs the cost.

That cuts into profits and could have other impacts, like forcing the company to offer fewer hours or calling off employee raises.

But that’s not to say China isn’t paying a price. Its exporters have to weigh discounts that offset tariff costs with potentially losing customers to tariff-free options.

Some experts say these tariffs will hurt China long-term as American importers find those other sources.

The tariff money the U.S. government is taking isn’t piling up. The government has established multiple rescue funds to help American farmers.