Associated Press Economics Writer Paul Wiseman
WASHINGTON (AP) – Customs duties are currently in the news. Here’s what they are and what you need to know about them:
Customs duties are taxes on imports
Customs duties are usually charged as a percentage of the price the buyer pays to the foreign seller. In the United States, customs duties are collected by customs and border security agents at 328 ports of entry nationwide.
Customs fees vary in the US. For example, passenger cars usually have a 2.5% rating, while golf shoes are 6% rating. Tariffs can be lower in countries where the US has trade agreements. Most goods moved between the US and those countries with no tariffs due to President Donald Trump’s US-Mexico-Canada trade agreement before the US began to impose 25% tariffs from Canada and Mexico as of Tuesday.
Mainstream economists are generally skeptical of tariffs and see it as an inefficient way for governments to raise revenue.
There is a lot of misinformation about who actually pays the duties
Trump is a tariff supporter and claims he is being paid from abroad. In fact, it is the importers – the American companies that pay the tariffs, and the money goes to the US Treasury Department. These companies usually pass higher costs to their customers in the form of higher prices. That’s why economists say consumers are making legislation on customs duties.
Still, tariffs can hurt foreign countries by making products more expensive and difficult to sell overseas. Foreign companies may have to cut prices and sacrifice profits in order to offset tariffs and try to maintain market share in the US. Yang Zhou, an economist at the University of Hudun in Shanghai, concluded in a study that Trump’s tariffs on Chinese goods caused more than three times more damage to the Chinese economy that had committed on the US economy.
What did Trump say about tariffs?
Trump said tariffs will create more factory jobs, reduce federal deficits, lower food prices and allow the government to subsidize childcare.
“Taxes are the biggest invented ever,” Trump told a rally in Flint, Michigan during the presidential election.
During his first term, Trump imposed a prosperous tariff – targeting imported solar panels, steel, aluminum and almost everything from China.
“Customer man,” he called himself.
Trump is moving forward with high tariffs in his second term.
In recent years, the United States has gradually retreated from its post-World War II role in promoting the decline in global free trade and tariffs. It is generally a response to the loss of employment in US manufacturing, which is widely attributed to China’s rise as a free tree trade and manufacturing force.
Tariffs are primarily intended to protect domestic industries.
By increasing the prices of imported goods, tariffs can protect residential cultivation manufacturers. They may also help punish foreign countries for unfair trade practices such as exporter subsidies and dumping products at unfairly low prices.
Before the establishment of federal income tax in 1913, tariffs were the main source of income for the government. Tariffs accounted for 90% of federal revenue, according to Douglas Irwin, an economist at Dartmouth University who studied the history of trade policy from 1790 to 1860.
As world trade grew after World War II, tariffs became less favorable. The government needed a very large revenue stream to fund its operations.
For the fiscal year ended September 30th, the government raised approximately $80 billion in tariffs and fees. This is a trivial thing next to $2.5 trillion from individual income taxes and $1.7 trillion from Social Security and Medicare taxes.
Still, Trump supports budgetary policies similar to those that existed in the 19th century.
Tariffs can also be used to put pressure on other countries on issues that may not be related to trade-related. In 2019, for example, Trump used tariff threats as leverage to persuade Mexico to crack down on a wave of Central American immigrants crossing Mexican territory on his way to the United States.
Trump even sees tariffs as a way to prevent war.
“I can do that on the phone,” he said at an August rally in North Carolina.
When another country tries to start a war, he says it will pose a threat:
“We charge 100% tariffs, and all of a sudden, anyone who has a president, prime minister, dictator, or hell running through the country tells me, “We won’t go to war.” ”
Economists generally believe that tariffs are self-destructive
Tariffs increase the costs of businesses and consumers that rely on imports. They are also likely to cause retaliation.
For example, the European Union was struck against Trump’s tariffs on steel and aluminum by taxing US products, from bourbons to Harley-Davidson motorcycles. Similarly, China responded to Trump’s trade war by slapping tariffs on American goods, including soybeans and pork, on a calculated drive that hurt farm supporters.
A survey by economists at the Massachusetts Institute of Technology, Zurich University, Harvard University and the World Bank concluded that Trump’s tariffs failed to restore employment in the American centre. The tariffs are being studied as “did not raise or lower US employment” where they were supposed to protect jobs.
For example, despite Trump’s 2018 tax on imported steel, the number of jobs in US steel factories has barely swelled. They remained at about 140,000. In comparison, Walmart alone employs 1.6 million people in the United States.
Worse, retaliation taxes imposed on US goods by China and other countries have been investigated “negative employment impacts,” particularly for farmers. These retaliatory tariffs were partially offset by billions of aid in government aid that Trump ignored farmers. Trump’s tariffs also hurt businesses that rely on targeted imports.
But if Trump’s trade war was fizzed as a policy, it was a success as a politics. The survey found that support for Trump and Republican Congressional candidates rose in areas most exposed to import tariffs. This is the industrial Midwest and manufacturing southern states like North Carolina and Tennessee.
Original issue: March 4th, 2025, 10:14am EST
