A Simple Guide to Tariffs

You’ve likely heard of tariffs in the news lately. In this article, we’ll explore what they are, how they work and what they could mean for your wallet. And while tariff policy changes can be challenging and confusing, no matter what happens Horizon remains dedicated to helping you achieve your financial dreams.

What Are Tariffs?

A tariff is a special tax placed on goods that are imported into a country — basically, products made in other countries that are brought in for sale. Often they’re used as a way to make foreign-made goods more expensive, giving locally made products a better shot at competing. Tariffs also raises revenue for the government.

You might not see the word “tariff” on a price tag, but you might feel the effects when you go to the store. Those extra charges can impact the price of products you buy, from clothes to electronics.

Who Pays the Tariff?

When a tariff is applied, it’s the importer — typically a company or business bringing products into the country — who pays it. In the U.S., this payment goes to the federal government through U.S. Customs and Border Protection.

While you don’t pay the tariff directly, you may end up paying more for goods. That’s because the importer might raise prices to cover the cost of the tariff, making the product more expensive for you when you buy it.

What Tariffs Are Used For?

Tariffs serve several purposes, and they’re often used to achieve specific goals:

• Protecting local industries: By making imported goods more expensive, tariffs help local businesses compete with foreign products.
• Encouraging people to buy local: When imports cost more, shoppers may turn to homegrown alternatives.
• Responding to trade disputes: Sometimes, tariffs are used in trade negotiations, either to make a deal or as a way to retaliate against another country’s trade policies.
• Generating government revenue: Although less common, tariffs can be a way for governments to raise money.

Tariffs can be temporary or long-term, depending on the goals of the country.

How Tariffs Can Affect You

Even if you’re not directly importing goods, tariffs can impact the products you buy. Here are some examples:

• Buying a car? If there’s a tariff on foreign cars, you might see a price increase when you buy one.
• Shopping for electronics? If the parts used to make them are imported, and those parts are subject to tariffs, your new phone or laptop could cost more.
• Groceries, clothes, and household items could all see higher prices if tariffs are placed on the materials used to make them.

While tariffs can increase prices, they can also help protect certain U.S. industries. So, while you might pay a little more for that imported product, it could mean more job opportunities and growth for local businesses.

Horizon is Here for You

We understand that navigating economic changes can sometimes feel overwhelming. No matter what’s happening in the economy, we’ll continue to provide the tools and support you need to achieve your financial dreams. If you ever have questions about how these economic factors might affect your finances, don’t hesitate to reach out. We want you to feel confident in your decisions, and we’ll do our best to guide you in the right direction.