DEEP DIVE

 Deep dive into TARIFFS

Tariffs are added costs applied to products shipped between countries at the shipping country's discretion or by the receiving country at it's discretion.  A country can place a tariff upon outgoing or incoming products.  There is an International Harmonized System that classifies all goods by name, material and use into one of over 17,000 classifications with a 10-digit code.  All countries use this system.  In our country, the U.S. International Trade Commission maintains this list.  This system was adopted here during the Reagan Administration.

So, tariffs can be placed on any of these 17 thousand categories.  Centuries ago, the Congress gave that authority - to place or repeal tariffs - to the President.  It's one of the few things he can do without asking anyone's permission.

You could see all the tariffs in force by going to the HTSUS (Harmonized Tariff Schedule of the United States).  This schedule is enormous; it has 99 chapters, under 22 sections and many appendices for various chemicals, dyes, and the like.  The U.S. Customs and Boarder Protection agency is the watchdog and final arbiter for questions and interpretations in regard to tariffs.  

Tariffs placed on incoming goods are usually used to equalize the costs between imported items and those manufactured within a country.  This is based on the theory that consumers will purchase at least cost at retail.  In this case, the tariff is good for the manufacturer in the country because it equalizes competitive prices.  But this might hurt the consumer who now has to pay a higher price.  The tariff in this case is a two-edged sword.  Also, one must be very careful about how much a tariff should be.  If you put too high a tariff on a product that was low in the marketplace but now is high, those in-country manufacturers will raise their price to meet the new market price created by the tariff. Consumers will pay even more.  

Sometimes tariffs are placed on incoming goods because the manufacturing country is "dumping" products at low prices to maintain pricing in their country.  Tariffs dissuade this practice. Sometimes tariffs are placed on incoming goods because a particular industry is being hurt by goods being brought in at a very low price because of labor wage differences.    

Tariffs placed on outgoing goods are used as a penalty or leverage to offset some difference in other goods.  

Whoops!  My kids have told me never to write this much at one time.  Sorry.  I quit.