March 18, 2025 | 04:15 pm

TEMPO.CO, Jakarta - The inauguration of U.S. President Donald Trump has invoked lingering worry among many collective residents for his distressing policies across different sectors including global trade markets. Tempo reported that The President has made a significant increase in import tariffs on goods coming from China, Canada, and Mexico. Furthermore, the country also announced a doubled entry duty on goods from China to 20 percent.
Amid alarming regulations circulating, people begin to question the baseline of this policy: “How do tariffs affect the economy?” “Who benefits from these arrangements?” and many more. In this article, we’ll discuss the definition of tariffs, explore how they work, and examine their far-reaching effects on both local and global economies as cited from various sources.
What Are Tariffs?
A tariff is a government tax on imported goods driven by several factors including revenue acquisition and domestic product protections. Companies importing goods at the borders must adhere to the amount of tariffs charged to access the local trade market. That's why importing countries like China, Canada, and Mexico have been concerned about this rule.
Protection of domestic industries despite an optimistic outlook, a tariff could also pose a hindrance. While consumers may opt to buy from local sellers offering cheaper goods, many other products made in a home country require some imported goods. Rather than protection, tariffs may stand as stubborn interferences for local companies to thrive on cases alike.
How Do Tariffs Affect the Economy?
Tariffs affect the economy in a far greater way than we think, from the cart of consumers and surging business costs, to a tied relation between two countries. On the most noticeable layers, the increase in cost from tariffs could harm consumers due to the possibilities of product rarity.
Eliminating competition doesn’t always translate to positive outcomes, with similar cases presented by tariffs ongoing predicaments. A lack of competition naturally increases the prices across different sectors. It could also result in tension caused by favoritism over certain industries, regions, and many other market gauges.
According to UC Davis magazine, imposing higher tariffs could alienate importing countries. Take China for example, the manufacturing giant could boldly invest in another country with cheaper tariffs. Among other pressing issues, this could cause unemployment.
University of Virginia adds, straining tariffs raise the possibility of a trade war where partners retaliate. As a result, the damage to global economic growth is one of the most significant downturns. Therefore, charging high tariffs affects prices for consumers and causes much larger disputes between partner countries.
Tariffs significantly impact the economy by increasing consumer prices, raising business costs, and straining international relations. While aimed at protecting domestic industries, they can inadvertently hinder growth, provoke trade disputes, and drive manufacturing to countries with lower tariffs, ultimately affecting global economic stability.
For a similar inspiration, stay updated on the world’s current issues by checking out the largest economies in the world here.
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