A tariff is a tax on imported goods. It is one of the oldest tools of economic policy, and for most of the 19th century it was the federal government’s main source of revenue. It is also one of the most misunderstood, starting with the question of who pays.
Who writes the check
When a shipment arrives at a U.S. port, the importer of record, usually an American company, pays the tariff to U.S. Customs and Border Protection before the goods are released. The foreign exporter does not pay the government anything directly.
Who bears the cost
Who ultimately absorbs the tax is a separate question, called incidence. The importer can absorb it in lower profits, pass it on to customers in higher prices, or push the foreign supplier to cut its price. Studies of the U.S. tariffs imposed in 2018 and 2019 on steel, aluminum, washing machines and Chinese goods, including work by economists at the Federal Reserve Bank of New York, Princeton and Columbia, found that nearly the full cost was passed through to U.S. importers and, in many cases, consumers. Foreign exporters cut prices only modestly. Later research has found more mixed results for some products and countries, but the broad finding that Americans bore most of the cost has held up.
The other effects
- Domestic producers of the protected goods can raise prices or expand, which is often the policy’s goal. A study of the 2018 washing machine tariffs found domestic and foreign prices both rose, and dryers rose too, even though they were not tariffed.
- Downstream industries that use imported inputs, such as automakers buying steel, face higher costs.
- Retaliation. Trading partners often respond with their own tariffs. China’s retaliation in 2018 hit U.S. farm exports so hard that the federal government paid farmers tens of billions of dollars in aid.
The laws presidents use
The Constitution gives Congress the power to set tariffs, but Congress has delegated much of it:
- Section 232 of the Trade Expansion Act of 1962 allows tariffs on national security grounds.
- Section 301 of the Trade Act of 1974 allows responses to unfair foreign trade practices.
- Section 201 allows temporary “safeguard” tariffs when imports seriously injure a domestic industry.
- The International Emergency Economic Powers Act (IEEPA) was used in 2025 as the basis for broad tariffs on many countries. Businesses and states challenged that use in court, arguing the law does not authorize tariffs, and the case reached the Supreme Court. Check the current status of those tariffs, since rulings and executive actions have changed them repeatedly.
How to read tariff claims
When a politician says another country is paying a tariff, ask what the evidence shows about prices. When an opponent says a tariff will raise prices by a specific amount per household, check whose estimate it is and what it assumes about retaliation and substitution. Both claims are common, and both are often stronger than the evidence.