What is a tariff?
A tariff is a tax imposed by a country's government on imported goods. Its main purpose is to increase the price of imported goods and thus protect the competitiveness of domestic products. Tariffs can be divided into three main types:
Ad valorem tax: levied in proportion to the value of the goods (such as a 10% import tax).
Specific tax: levied according to the quantity of goods (such as 100 yuan per ton).
Compound tax: a combination of ad valorem tax and specific tax.
Tariffs can also be used to increase government fiscal revenue, adjust import and export structures, and exert pressure as a diplomatic means.
Impact of tariff policy
Positive impact:
l It has improved the competitiveness of some local industries.
l It has successfully forced some countries to renegotiate trade agreements.
l It has triggered domestic discussions on economic sovereignty and the return of manufacturing.
Negative impact:
l It has triggered a "trade war", especially the mutual tariff increase with China, which has led to global economic instability.
l The price of imported goods has risen, leading to increased costs for consumers.
l Enterprises are facing rising costs and reduced profits, and some industries such as agricultural products have been hit by foreign retaliatory tariffs.
l It has inhibited the normal operation of the global supply chain, and there has been no obvious return of manufacturing.
The impact of tariffs on U.S. imports from China
Direct impact of tariffs on US imports from China
The total amount of US imports from China has dropped significantly after the imposition of tariffs.
The import volume of "heavy tax" industries such as electronic products, furniture, and toys has increased significantly. Small and medium-sized enterprises have been forced to reduce or terminate procurement contracts with China due to rising tariff costs.
Impact on US consumers and businesses
Rising commodity prices
l Tariffs increase the cost of Chinese products, which is ultimately passed on to consumers
l From 2018 to 2019, US tariff revenue increased by about $46 billion, but consumers and importers borne more than 90% of it; prices of daily necessities such as televisions, furniture, and baby products generally rose;
Increased operating pressure on enterprises
US companies rely on China's mature supply chain system and face several major challenges after the imposition of tariffs:
l Rising costs and falling profits;
l The cost of restructuring the supply chain is high and the cycle is long;
l Small businesses lack bargaining power and have weak stress resistance;
l Agricultural companies suffered export blows due to China's counter-tariffs, forcing the US government to launch an agricultural subsidy program.
