Topic: tariffs and how is it important? (Read 6 times)

If you had been following global economy, you might have heard of Trump's vision of implementing tariffs on to goods being imported to the US from Mexico, Canada and China. Simply said, tariff is the tax that needs to be paid when products from aforementioned countries enter the USA. From this statement alone, it might seem like a good thing. Other countries paying more to the US to export their goods. But upon closer inspection, it is actually not that simply effective.

To understand why, we need to realize first who pays these tariffs? The answer is not the countries exporting the goods but rather the domestic companies from the US that imports these goods from other countries. So if a company in the US gets their supplies from other countries, with these tariffs they are expected to pay more to the US government just to get these products. The obvious action next is to find different suppliers preferably one that is already in the US. Now this would help the US if their domestic companies indeed go down that route. But also they could just raise up the prices to be proportional to how much they are paying to get those goods in.

Another thing is with these tariffs implemented on other countries, said countries can also retaliate. They can also do the same thing. If you were Mexico, Canada and China... what would be your course of action?