Tariffs Summed Up

Tariffs are used for one main purpose: to encourage the sale of domestic goods. In theory, they can do this by (A) making imported goods more expensive, and (B) protecting domestic companies from foreign competition. Tariffs do not help lower prices, as they are typically used to make currently-popular foreign products more expensive. This can help domestic companies compete, but If tariffs make imported goods more expensive, it can also become even harder to encourage widespread domestic sales due to overall higher costs. Donald J. Trump’s tariffs have been most consistent and aggressive with China. In response, China has also imposed tariffs on the United States. Trump’s “reciprocal trade plan” targets countries that, in his words, have “ripped us off.” Under this plan, countries start with a base tariff of 10%, while others face steeper rates. As a result of Trump’s tariff strategy, the stock market has experienced significant declines, reaching lows not seen since 2020—mainly due to the COVID-19 pandemic. Major indexes like the Dow Jones and NASDAQ have dropped by as much as 200 points. The tariffs are intended to influence trade relations between countries, promote U.S. manufacturing, and generate revenue.