this post was submitted on 06 Apr 2025
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Explain Like I'm Five
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But what is a tariff? What does it do?
It is an extra charge on top of products from overseas that is paid to the government.
If you were a small island and you had farmers that can't compete with grain from other countries, you could either subsidize them or have a tariff on grain from overseas. First would lower the price of produce they would make, so they can compete, second would raise the local price of overseas product so they can compete. Both are valid strategies in niche situations.
Thanks for that... tbh I'm neurodiverse so I need it broken down a bit simpler if that's ok?
If US companies are making cars and selling them at 20,000 each and another country starts importing their cars for sale at 8000 a piece, the government can put a tariff on that country’s cars to bring the price equal to or more than the 20,000 the US companies sell for so the US companies don’t go out of business by being undercut. The problem is that the other country can retaliate with equal or more tariffs if we import products there.
Tariffs are designed to be used prudently and only in extreme cases which would damage the countries business by radically different pricing of similar products.
The ham fisted broad tariffs that Trump is doing don’t fit any tariff model or make any sense.