A tariff is a tax levied by governments on goods imported from foreign countries.
Tariffs can improve sales for domestic industries and limit foreign competition by forcing imports to raise prices to compensate for the tariff. Ultimately, consumers pay these additional taxes, making imported products more expensive than domestic goods.
Tariffs are a tool used by governments the world over to attempt to balance trade between countries. For merchants, understanding tariffs can significantly impact pricing strategies.
What are reciprocal and retaliatory tariffs?
Reciprocal and retaliatory tariffs are broadly very similar, the difference between them comes down to the way in which they are brought about, and the tone of the situation.
- A reciprocal tariff is often negotiated as part of a trade agreement and looks to make trade between two countries fair and even.
- Retaliatory tariffs, which have been in the news recently, are tariffs that are issued in response to a tariff put in place by a country. They are by nature more punitive and are not part of a negotiation.
What is de minimis?
De minimis is a legal doctrine that directly refers to “minimal things”. However, within the context of tariffs de minimis refers to duty-free treatment for shipments under a certain threshold, for example, for the US that threshold is USD 800 per person per day.
What is ad valorem?
Tariffs can take several forms. The most common is an ad valorem tariff, which means that the customs duty is calculated as a percentage of the value of the product.