Let’s dumb this down so maybe you can finally understand.
Let’s say you sell MAGA hats. You get the hats from China because you chose a Chinese manufacturer to supply them. (You could have chosen an Indonesian manufacturer, but they sell the same hats for $12.) You pay the Chinese manufacturer $10 for every hat you receive, then you sell a hat to a fellow cult member for $15, making a $5 profit from every hat you sell. (This is EXTREMELY simplified – there were already tariffs in place, but we’ll play pretend for the sake of simplicity.)
Then, a tariff of $5 per hat is imposed just because Trump wanted it.
The Chinese manufacturer may still sell you each hat for $10, but in order to receive it, you have to pay $15 to cover both the sale from the manufacturer AND the Customs fee required for the hat to enter the country. Customs is in the US you know, NOT in China as you may assume. You buy from a manufacturer and YOU pay Customs – that tariff is paid by YOU, NOT the manufacturer.
China will complete your order, but YOU have to pay extra now to receive it.
Are you still going to sell the hat for $15 now that you won’t get any profit? Or are you going to raise the cost of the hat to $20 so you keep getting the same profit you made before the tariffs were put in place? And actually, since you have to raise the price anyway, maybe it’s time to increase your profits and raise the price to $25? Because you might as well take advantage of the opportunity since it’s there.
So, a hat that used to cost the consumer $15 now costs them at least $20, possibly $25.
THAT’S how tariffs raise the costs on American consumers, in a very simplified (read: dumbed down) explanation. Because if you think anyone is willing to lose profits over this, you’re even more out of touch than your question already proves you to be.
Donald Trump was told about “tariffs” and he wasn’t really listening as usual. He thought it was some kind of fee that countries would pay in order to do business with the US. He even started to form an External Revenue Agency to collect them. Fortunately, people who actually knew how tariffs work prevailed and Diaper Don was forced to “delay” imposing them. In other words he backed down.
So tariffs are not a fee that countries pay to the US for the privilege of doing business with them.
They are actually a tax that the US government levies on Americans who import goods from outside the US.
You are American, you buy something from outside the US so ergo, you pay the tax.
Since everything that Americans buy is either made abroad or depends on material from abroad in their manufacture, the cost to you as an American increases.
Lets say that you are in China on vacation. As you walk around your shoes break and you need to buy a new pair. You find a seller that sell shoes for $10, buy one pair and start walking. You like the pair and think that if you bought 100 pairs you could sell them in the USA easily for $20 and double your money. Why no, its a free market in a free country right? So you go back to the store, buy 100 pairs, pay $1,000 and the store will send them to you shipping free (or not).
So far you paid $1,000 and plant on selling for $2,000. The shoes arrive and customs retains then until you pay the import tariffs which lets say is 10%. So far you cost is $1,000 + $100 tariff = $1,100. To double your money you will have to sell the shoes for $2,200, or $22 a pair. Still doable. But now lets say that the tariffs is 100%. Your cost now is $1,000 for the shoes + $1,000 for the tariffs you pay to the USA government.
So now your cost is $2,000. In order to double your money you will have to sell for $4,000, or $40 a pair. Some people might still buy a pair but at that price you might find difficult to sell the 100 pairs, so your goal of doubling your money is not going to happen. You will have to sell for less and work harder to sell your merchandise. If you sell for $30 a pair and you can sell all the pairs, you will still make some money but you are investing $2,000 to make a profit of $1,000.
Now lets see what happens with a tariffs of 165%.
Cost $1,000 + tariffs $1,650 = $2,650. Forget about doubling your money. If you sell for $30 a pair your total profit will be $350.
Your phrasing is not quite right.
The tariff is paid BY THE IMPORTER at the US Customs port of entry.
So, technically, the goods have arrived in the US but are held in Customs pending clearance.
In a great many cases of commercial shipments the tariffs will be prepaid BY THE IMPORTER to speed release of the goods through Customs and transborder shipment – say in the case of softwood lumber from Canada which passes my house almost daily.
The US nearly doubled the tariff on Canadian softwood lumber in August 2024 to 14.5%.
US consumer prices rose accordingly.
It is a simple cost of goods equation.
Home Depot buys a train load of Canadian 2×4. They pay the 14.5 tariff on import.
Every $1 now becomes $1.145.
But there’s more. You have to apply the profit margins on top of the tariff to maintain company profits.
Say the margin is 50%.
What was $1.50 now becomes $1.715.
But of course that 2×4 didn’t cost $1. It’s more like $5 and the effect is even more dramatic.
Now imagine we’re talking a 25% tariff and we’re talking about some like a car made by GM or Ford in a Canadian plant. That’s real money.
