Explainer: What are tariffs, how do they work, and who pays for them?

CGTN Europe

Tariffs are in the news at the moment. Donald Trump just announced new tariffs on imports from Canada, Mexico, and China, sparking backlash and fears of a trade war. Here’s what tariffs are and what you need to know about them.  #Trump #tariffs #tradewars #China #Canada #Mexico #economy #explained

Transcript

00:00I always say tariffs is the most beautiful word to me in the dictionary.

00:04Tariffs, Trump's favorite economic buzzword.

00:07So what exactly is a tariff and how do they work?

00:10Simply put, a tariff is a tax that governments place on goods entering their country from

00:14abroad.

00:15Think of it as a fee for crossing the border.

00:17For example, if an American car company imports parts from Mexico, those parts are taxed when

00:22they arrive in the US.

00:23That's the tariff.

00:24But here's the kicker.

00:25This tax isn't paid by the foreign country.

00:28It's paid by the American company bringing in the goods.

00:30They do so by raising prices for you, the consumer.

00:34Now why does Trump love tariffs?

00:36For Trump, trade is a game of winners and losers and he thinks the US has been losing

00:40for decades.

00:41He often points to countries like China, Mexico and Germany, accusing them of unfair practices

00:46like stealing American intellectual property, manipulating their currency and flooding markets

00:51with cheap, subsidized goods.

00:54Tariffs to him are the ultimate weapon to fight back.

00:57Besides, tariffs were part of his promise to bring jobs back to American shores.

01:02His message to manufacturers was clear.

01:04Move production to the US and you avoid tariffs.

01:08It was a rallying cry for workers, in places hit hard by globalization and job losses.

01:13But here's the problem.

01:14Global supply chains are like Jenga towers.

01:17Move one piece and the whole thing could collapse.

01:20Building factories takes years and most companies can't simply pack up and move.

01:24That said, tariffs often just raise costs and consumers feel the pinch through higher

01:29prices.

01:30So are tariffs truly the most beautiful solution for America's economy?

01:34Well, the debate continues.

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