Tariff
Tariff A tax imposed by a government on imported or exported goods to protect domestic industries, raise revenue, or achieve other economic, political, or social objectives.
Latest Update (March 2025)
The U.S. Trade Representative announced a review of all Section 301 tariffs on Chinese goods, while simultaneously imposing new tariffs on critical mineral imports from several countries under Section 232.
Read Full AnalysisWhat It Means
A tariff is a tax or duty imposed by a government on goods imported from or exported to other countries. In practice, most modern tariffs are placed on imports rather than exports.
Primary Types of Tariffs
Tariffs come in different forms, each calculated differently and serving various purposes:
Ad Valorem Tariff
A percentage of the value of the imported goods
15% of a $1,000 item = $150 duty
Specific Tariff
A fixed amount per unit quantity of the imported item
$5 per barrel of oil
Compound Tariff
Combines both ad valorem and specific tariffs
10% + $2 per kg of cheese
Why Countries Impose Tariffs
Economic Reasons
- Protect domestic industries from foreign competition
- Generate government revenue
- Correct trade imbalances
- Support infant or strategic industries
Political & Security Reasons
- National security concerns
- Retaliation against other countries' trade policies
- Leverage in trade negotiations
- Promote self-sufficiency in critical industries
How Tariffs Affect Trade
Increase Product Prices
Tariffs make imported goods more expensive for consumers and businesses, which can lead to higher prices across the economy.
Shift Supply Chains
Companies often relocate production to avoid tariffs, creating new trade patterns and business relationships.
Reduce Trade Volume
Higher tariffs typically result in lower volumes of international trade as the increased costs make some transactions unprofitable.
Risk Trade Retaliation
Countries often respond to new tariffs with their own tariffs, potentially escalating into trade wars that can have widespread economic impacts.
Historical Timeline
First U.S. Tariff Act
The Hamilton Tariff established a 5% duty on most imports, primarily for revenue generation
Tariff Era
Tariffs were the main source of federal revenue and often exceeded 40% on many goods
Smoot-Hawley Tariff Act
Raised U.S. tariffs to record levels, deepening the Great Depression
GATT Formation
The General Agreement on Tariffs and Trade began the process of reducing global tariffs
World Trade Organization (WTO) Created
Replaced GATT and established a more structured framework for international trade and tariff regulation
Section 301 & 232 Tariffs
U.S. implemented substantial tariffs on China and various other countries, reshaping global trade patterns
Real-World Example
Example: Importing Furniture from Vietnam to the United States
Let's walk through a practical example of how tariffs work using a furniture import scenario.
Step-by-Step Import Process
Determining the Correct Tariff
Find the HTS Classification
A U.S. furniture importer identifies the correct Harmonized Tariff Schedule (HTS) code: 9403.60.8081 - "Wooden bedroom furniture, other than chairs"
Check Regular Duty Rate
The importer looks up the Most Favored Nation (MFN) duty rate: 0% for Vietnam
Check for Special Tariffs
The importer also confirms there are no Section 301, anti-dumping, or countervailing duties on this product from Vietnam
Duty Calculation Example
Import Details
Fees Calculation
Less than 0.5% of total shipment value, thanks to duty-free status under Most Favored Nation treatment
Comparative Scenario: Same Product from China
If the same furniture were imported from China instead of Vietnam:
Vietnam Import
- Basic Duty: $0 (0%)
- Total Fees: $565.68
- Effective Rate: 0.47% of value
China Import
- Basic Duty: $0 (0%)
- Anti-dumping Duty: $93,600 (78%)
- Total Fees: $94,165.68
- Effective Rate: 78.47% of value
This example shows how dramatically tariffs can affect sourcing decisions. The same bedroom furniture from China would cost nearly 78% more to import due to anti-dumping duties that have been in place since 2005. This explains why Vietnam has become a major furniture exporter to the United States.
Calculate Import Duties on Your Products
Use our HTS code lookup and tariff calculator to estimate the duties you may owe.
Use Duty CalculatorNeed help navigating the complex world of tariffs?
Get expert guidance on tariff classification, duty rates, and compliance strategies.
Connect With Customs ConsultantsFrequently Asked Questions
The terms 'tariff' and 'duty' are often used interchangeably, though there are subtle differences. A tariff technically refers to the schedule or list of rates that are charged on imported goods, while duty is the actual tax collected. In everyday usage, however, both terms refer to taxes on international trade. Most trade professionals use both terms to mean the same thing: a tax on imported goods.
No, many goods enter the United States duty-free, either because they have a 0% Most Favored Nation (MFN) rate or because they qualify for duty-free treatment under free trade agreements or special preference programs. According to recent data, about 70% of all U.S. imports (by value) enter duty-free. However, even duty-free goods still incur fees like the Merchandise Processing Fee and Harbor Maintenance Fee.
To determine the correct tariff rate, you need to: 1) Find the proper Harmonized Tariff Schedule (HTS) classification code for your product, 2) Check if any preferential trade agreements apply, 3) Verify if any special tariffs like anti-dumping, countervailing, or Section 301/232 duties apply. The process can be complex, and many importers use licensed customs brokers or trade consultants to ensure accurate classification and duty assessment.
The economic impact of tariffs is complex and depends on various factors. Tariffs can protect domestic industries and workers from foreign competition and provide government revenue. However, they also raise prices for consumers and businesses that use imported inputs, potentially reducing purchasing power and competitiveness. Most economists agree that while targeted, temporary tariffs can sometimes benefit specific sectors, broad, long-term tariffs typically create more economic costs than benefits for the overall economy.
Legally, tariffs are paid by the importer of record, typically the U.S. company importing the goods. However, the economic burden (or incidence) of tariffs may be shared between foreign producers, importers, and consumers, depending on market conditions. Studies of recent tariff increases suggest that in many cases, U.S. businesses and consumers bear most of the cost through higher prices, though the exact distribution varies by product and market. Foreign producers may absorb some of the tariff cost by reducing their prices to maintain market share.