What are tariffs? Tariffs are essentially taxes imposed on imported goods by a government or a supranational union. In some cases, tariffs can also be applied to exported goods. They serve dual purposes – generating government revenue and acting as a tool for trade regulation, often used to protect domestic industries.
There are four primary types of tariffs:
- Ad valorem tariffs: These tariffs are percentage-based on the value of goods. For instance, a 20% tax might be imposed on goods worth $100.
- Specific tariffs: These tariffs are fixed fees based on the quantity of goods. For instance, a $5 tariff might be imposed on each imported kilogram of sugar.
- Compound tariffs: These tariffs are a combination of specific and ad valorem duties applied to the same imported goods. The total tax is determined by calculating both tariffs together. For instance, a country may impose a tariff on imported wine at $5 per liter plus an additional 10% of the wine’s cost.
- Mixed tariffs: These tariffs apply either a specific or ad valorem duty, based on predefined conditions. For instance, for imported trucks, a country may charge either $5,000 per vehicle or 15% of the vehicle’s value, whichever is higher.
The objective of these policies is to influence international trade flows, protect domestic industries, and respond to unfair practices by foreign countries. When a tariff is applied to an imported good, it raises its cost, making domestically produced alternatives more attractive to customers in terms of price.
In the US, the Trump administration used reciprocal tariffs as a significant instrument to influence the trade policies of other nations. Reciprocal tariffs are trade duties that a country imposes in retaliation to tariffs or barriers set by another country. The aim of this policy is to correct trade imbalances and safeguard domestic industries.
Did you know? Some countries use tariff-rate quotas, which allow a specified quantity of a product to be imported at a lower tariff. Once the quota is exceeded, a higher tariff is imposed. This system balances domestic protection with access to global markets, particularly in sectors like agriculture and textiles.
The trade conflict between the US and China wasn’t just a bilateral spat. It signaled a structural rethinking of trade policy in a multipolar world. The trade war began after the US imposed sweeping tariffs under Section 301 of the Trade Act of 1974, citing unfair trade practices, intellectual property theft, and forced technology transfers by China.
Over time, the US levied tariffs on more than $360 billion worth of Chinese goods. China retaliated with tariffs on $110 billion of US exports, targeting critical sectors like agriculture and manufacturing.
The conflict disrupted major supply chains and raised costs for American businesses and consumers. American farmers were hit hard by retaliatory Chinese tariffs on soybeans, leading the US government to provide billions in subsidies to offset losses.
While the Phase One Agreement in 2020 eased tensions and required China to increase purchases of US goods and enforce intellectual property protections, many tariffs remained in place. The Biden administration retained most of the economic measures imposed by the first Trump administration, signaling bipartisan concern over China’s trade practices.
As of April 10, 2025, Trump had imposed 125% tariffs on China, while for 75 countries, he had paused the imposition of tariffs for 90 days.
When a tariff is applied — for example, a 30% tax on imported steel — it raises the price of that good for importers. They, in turn, pass these added costs to downstream businesses, which further transfer these costs to consumers.
Overall, while tariffs aim to protect domestic industries, their impact is felt across the economy through altering prices, trade flows, and business strategies. Tariffs influence everyone — from factory owners to workers and everyday shoppers.
Trump’s tariff announcement on April 2 triggered a sharp sell-off in both equities and Bitcoin (BTC), with BTC plunging 10.5% in a week. According to analysts, institutional investors increasingly treat BTC as a risk-on asset closely tied to policy shifts. While some view Bitcoin as digital gold, recent behavior shows it reacting more like Nasdaq stocks — falling during global uncertainty and rallying on positive sentiment.
Did you know? Tariff exemptions can be highly strategic. Governments may exclude specific industries or companies, allowing them to import goods tariff-free while competitors pay more. This creates an uneven playing field and can spark domestic controversy.
Whether used defensively or offensively, tariffs shape the balance between protectionism and global engagement. This makes tariffs a matter not just of economics, but of national strategy and global influence.
