Tariff

A tariff is a tax charged on goods when they cross a border, normally paid by the importer. It makes foreign goods more expensive relative to domestic products. Tariffs can be specific (a fixed amount per unit) or ad valorem (a percentage of the value).

Tariffs were the main source of federal revenue until the income tax was created in 1913. The Smoot-Hawley Tariff of 1930 raised duties broadly and is blamed by many economists for worsening the Depression through retaliation. After World War II, the General Agreement on Tariffs and Trade and the World Trade Organization lowered rates through multilateral agreements. Presidents may impose tariffs under several statutes, including section 232 tariffs on national security and the International Emergency Economic Powers Act, and legal challenges to such uses have reached the courts.

Economists generally agree that most of the cost of a tariff is borne by domestic importers and consumers through higher prices, though foreign exporters may absorb some, and that tariffs protect some industries at the expense of others. Supporters argue they protect strategic industries and jobs, serve as leverage in negotiations and raise revenue, and reflect protectionism. Opponents, including free-market conservatives, say they act as a tax on Americans and invite retaliation. See free trade.