What Are Tariffs?
Before we explore the current scenario, it's essential to clarify: what are tariffs? Simply put, tariffs are taxes placed on imported goods. They are typically charged at the point of entry, based on the declared value of the item. Their primary purpose is either to raise government revenue or protect domestic industries by making foreign goods more expensive.
Throughout history, tariffs have played a major role in shaping international trade — from colonial-era protectionism to the Smoot-Hawley Tariff Act of the 1930s, which deepened the Great Depression. So what is a tariff in history? It’s a tool of policy that governments have used both for economic gain and political leverage.
Who Pays a Tariff on Imports?
While governments impose tariffs, it's not them who actually pay the price — it's the importers who must settle the tax at customs. Ultimately, the cost is often passed down to the consumer. This answers the commonly asked question: who pays the tariff on imports? — it's mostly the end-user, through higher prices.
Who Gets the Proceeds From the Tariffs — What Is the Money Used For?
So, who gets the proceeds from the tariffs and what is the money used for? The U.S. government collects these tariffs, and the money goes into the general treasury. While sometimes earmarked for trade-related programs or subsidies to affected industries, there’s no guarantee of transparent allocation.
Timeline: How the Current Trade Chaos Unfolded
Trump began by slapping a 10% base tariff on goods from almost every country. For some nations, this jumped to as high as 50%, joining already-existing tariffs on imports from Canada, Mexico, and others. These new levies went into effect over a weekend, with Trump asserting that negotiations were irrelevant — he wasn’t backing down.
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China quickly retaliated, prompting Trump to promise a staggering 50% extra on top of existing U.S. tariffs on Chinese goods, raising the total rate to 104%. This escalation was implemented by Wednesday morning.But then came an unexpected twist: Trump announced a 90-day pause, supposedly based on outreach from over 75 countries. This came with a “substantially lowered Reciprocal Tariff” promise. Yet, despite the optics of relief, the 10% base rate remained.
Even White House officials appeared unclear about which tariffs applied where. The pause excluded Canada and Mexico and did not roll back all recent hikes. And so, uncertainty persists.
Steel, Aluminum, and Auto Tariffs
The simplest to understand are the 25% tariffs on steel, aluminum, vehicles, and auto parts. These started in February (for metals) and April 3rd (for cars). Auto parts will be taxed starting May 3rd.
Who benefits from tariffs like these? U.S. steel and aluminum manufacturers stand to gain, as imported metals become pricier. However, downstream industries (e.g., carmakers) often face higher costs.
Canada and Mexico: Mixed Signals
Canada and Mexico were early targets, with a blanket 25% tariff on all goods. Although initially paused, it was enforced in March. Thankfully, goods covered by USMCA are exempt. Canada retaliated with tariffs of its own; Mexico is on the fence.
Some confusion arose when the 10% baseline tariff appeared to include these neighbors, but it was later clarified that Canada and Mexico were exempt — for now.
The China Tariff War
Tariff example: China is a prime case. Trump began with a 10% levy in February, paused it, then resumed at 20%. On April 2nd, a 34% reciprocal tariff was layered on top, reaching 54%. When China retaliated, Trump escalated to 104%, then again to 145% total.
China fired back with tariffs of 125% and restrictions on Hollywood’s market access. The situation remains dynamic, and likely to worsen.
Tariffs on Low-Value Packages
Online retailers shipping cheap items from China and Hong Kong are now in the crosshairs. Goods valued under $800 were previously exempt (de minimis rule), but starting May 2nd, even those face taxation.
Sellers must pay 120% of item value or $100 flat rate per parcel — rising to $200 after June 1st. These changes severely disrupt the models of brands like Shein and Temu.
Global Tariffs — Who's Affected?
Outside North America and China, every country now faces a 10% base tariff on most goods, plus 25% on metals and autos. Countries like India, Vietnam, and EU members were temporarily hit with higher tariffs on April 9th — only for the hikes to be paused hours later.
They’re now at the baseline 10% — but only for 90 days. If no deal is struck, higher "reciprocal rates" will snap back.
The EU planned retaliatory tariffs (focused on politically sensitive U.S. exports) but paused them for 90 days as well.
Why Are Tariffs Bad?
Many economists argue that tariffs raise consumer prices, provoke retaliation, and hurt trade flows. This stifles competition and may hinder innovation. That’s why tariffs are often seen as harmful — or at least risky — in global trade dynamics.
Tariffs can also trigger trade wars, reduce investor confidence, and disrupt global supply chains. In today's interconnected world, why are tariffs bad? Because very few products are manufactured entirely within a single country anymore — taxing one part of the process raises costs for the whole industry.
Final Thoughts: Which Tariffs Are On, Which Are Off, and Which Are on the Way?
To summarize:
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ON: Steel, aluminum, autos (25%). Base 10% tariff globally (excluding Canada and Mexico).
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OFF (for now): High tariffs on India, EU, Vietnam — paused for 90 days.
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ON THE WAY: Electronics, chips, pharmaceuticals. Possibly more.
Tariffs continue to be a central and controversial tool in U.S. trade policy. Understanding who pays a tariff, what are tariffs, and who benefits from tariffs is key for businesses and consumers alike. In an ever-evolving landscape, awareness is your best defense.
