Name: What Are TARIFFS And Do They Work
Uploaded: 2025-04-07T06:33:05.000Z
Duration: 12 min 51 s
Description: Thousands of YouTube videos with English-Chinese subtitles! Now you can learn to understand native speakers, expand your vocabulary, and improve your pronunciation...

Tariffs, the term has become completely impossible to avoid in the news lately, and you're not alone if it's left you scratching your head.

And how will the US's potential new tariff platform affect you in your day-to-day life?

You don't need a degree in economics to understand all this, you just need to sit back and pay attention to this episode of The Infographics Show and you'll understand exactly how all of this will impact your wallet.

Thankfully, it's not actually that complicated.

Tariffs are a special tax placed on imported goods from other countries.

They're added directly to the price of goods as the import takes place.

But what does that mean in practical terms?

Let's say you're in the market for a new car.

You can't decide whether you want a BMW imported straight from Germany, or a Chrysler right from here in the US of A. The prices of the cars themselves are competitive, but why do you end up paying more for the imported Beemer?

It might be because of a tariff on imported cars.

But maybe we need to think a little bit bigger than that.

Maybe you're a company based in Silicon Valley, ready to create the next big thing in tech.

But to do this, you're probably going to need microprocessors.

They're required for everything from smartphones to washing machines, after all.

Taiwan isn't just an island in the Pacific, it's the microchip capital of the world, responsible for over a third of all global production.

But if there's a tariff on tech from outside the US, the costs might rise so high that your tech company will need to start exploring deals to build microchips right here in the

This is how tariffs can affect not only whole products made outside the US, like the BMW, but items manufactured in the US that are made from parts abroad, like the ambitions of our tech company.

Now let's take a closer look at why countries use tariffs, because this is crucial to understanding why a government might want to put them in place.

There are three reasons why a government might choose to impose a tariff.

Revenue, protecting domestic businesses, and as a political incentive against another country.

Revenue is the most straightforward of the three.

The government wants to collect taxes to fund its own initiatives, so a higher tax on imported goods makes for more government revenue.

Especially if the tariffs aren't high enough to force companies to shift to US-based production.

But if the taxes are severe enough that domestic companies consider a change, then the tariff might have been imposed to help protect domestic workers and manufacturers.

The rise of economic globalization has led to a lot of US industries, from tech to textiles, outsourcing their manufacturing work to other countries, often in Asia.

This not only encourages unethical labor practices like sweatshops to keep the manufacturing costs low, it also ends up affecting workers and companies in the US.

Take for example the automotive industry that was once the lifeblood of Detroit, Michigan.

Outsourcing automotive manufacturing, the move toward automation, and the increasing popularity of foreign cars moving into the US auto market had a ruinous effect on D-Town.

Theoretically, imposing stronger tariffs would have helped both companies and consumers support domestic automakers, and prevent their jobs from being outsourced overseas.

And then there's the strategic political element.

Tariffs might be a tool to help address a trade imbalance, also known as a trade deficit.

This is a situation where a company is importing more than it's exporting, meaning it's perhaps built in over-reliance on foreign goods.

However, trade deficits aren't necessarily a terrible thing.

The US has actually run on a trade deficit since the 1970s, and the impacts of this rarely have a considerable effect against the average consumer.

But still, if a government wants to address a trade deficit manually, then tariffs are a pretty good start.

Making it more costly and inconvenient to import parts and goods encourages consumers to shop local when they can, giving exports a chance to keep up while imports falter.

But this is an internal political strategy.

What if you want to use tariffs to affect other countries with economic leverage?

Tariffs can be used punitively, somewhat like a less severe approach to an economic sanction where trade with a sanctioned country is outright forbidden.

Imposing tariffs against a particular country's imported goods can hurt them economically, and this can be used as a bargaining chip for wider trade or political negotiations.

We've often seen this between the US and China from 2018 to 2020.

So that is what a tariff is, and a few reasons why a country might use them.

But there are a few much more serious and important details we need to get into now.

Who do the extra costs get passed on to, and how might some of the planned tariffs we're seeing in the news right now affect your wallet?

Let's look at two different types of tariff and how they work.

This is a fixed extra fee applied to an import, which will stay the same regardless of how much that import costs.

Let's return to your BMW you're thinking about importing.

If the government imposes a $2,000 specific tariff on auto products from Germany, you'll be paying $2,000 whether you're buying a $40,000 BMW X1 xDrive28i SUV or a $120,000

Then there's the other type, ad valorem tariffs.

These added costs are expressed as a percentage of the value of goods.

For example, a 10% tariff on fruits and vegetables grocery companies import from abroad, keeping the tariffs proportional to the specific goods.

At first glance, tariffs might seem like a win-win.

They protect local jobs and reduce dependence on foreign economies.

But the reality is, tariffs can have a hidden side.

Despite their good intentions, they often come with unintended consequences that can ripple through industries, raising costs and impacting consumers in ways we don't always expect.

One of these consequences is making domestic industries worse.

Without the competition of international trade keeping them on their toes, domestic companies might become an oligopoly, less accountable to the demands of their customers.

After all, it's not like they can just go shop somewhere else.

Less competition can also have another nasty effect for consumers.

Without competition, no competitive pricing, meaning that consumers don't even end up saving money.

On an international scale, like any political strategy, tariffs as a means to exert economic leverage on other countries could backfire.

Rather than getting the concessions they want, the other party might just impose tariffs right back in retaliation, resulting in a trade war that ultimately just hurts both parties at once.

We saw this again from 2018 to 2020, when the US imposed heavy tariffs against goods from EU member states and China.

This resulted in a number of retaliatory tariffs against US products from bourbon to Harley

But what does getting hurt by a tariff actually mean?

To answer that question, we need to ask ourselves another.

When tariffs get imposed on goods, who actually ends up footing the bill?

That's right, it's a huge oversight to think that the country exporting goods ends up paying extra.

The purpose of tariffs is to make foreign goods more expensive for you, the consumer.

It's a way to disincentivize you from buying those foreign goods, and instead shopping domestically.

Now this sounds like a pretty simple plan in an ideal world, but a quick look out your window and at your bank account reveals none of us live in an ideal world.

Lower income consumers are often the ones most impacted by tariffs.

They're already working with more limited options for where they can shop for basic necessities, including everything from food to bottled water to toilet paper.

If the more affordable foreign goods end up being made more expensive by tariffs, people without much money to spare will end up paying more either way.

You might think that small businesses would benefit from a rise in tariffs compared to huge multinational companies that heavily invested in international manufacturing.

Well, the truth isn't actually that simple.

In our modern, globalized economy, small businesses may just be as likely to benefit from imported goods and parts.

Without the same resources as their larger counterparts, a sudden rise in tariffs might throw their business into disarray.

Tariffs might sound simple in theory, but in practice, the gap between their intended benefits and the actual impact can be significant.

We've already discussed the theory at length here, but let's take a look at the practice for consumers and businesses.

For consumers, a sudden spike in the price of imported goods can feel like inflation with no escape.

In regions of the US that are heavily reliant on these imports, they're often left footing the bill if domestic alternatives aren't already available.

Without the infrastructures to support replacements, many are simply forced to absorb these higher costs.

And what about the businesses that need to acclimate to a high tariff world?