Do you know who really pays the tariffs?
When you hear the news that Donald Trump is imposing tariffs on imported goods entering the United States (US), who really has to pay the tariffs?
Many are confused, thinking that the tariffs will be borne by the exporter or the country to which the tariffs are directed.
But the answer is, the importers are the ones who pay the tariffs!
This means that if America imposes tariffs on China, the importing companies in the United States bear the tariffs on goods imported from China.
So what happens when the tariffs are implemented?
The first possibility is that the importers will absorb the tariffs and pay the price of the goods with a value higher than the original price before.
However, this is unlikely to happen because the importing company has to bear the losses.
Business must be profitable.
So, the second possibility, which is more likely to happen, is that the importers will pass on the cost of the increased price of the goods to the consumer.
The price of goods will be increased and will subsequently trigger a surge in inflation in the economy.
But if it burdens importers in their own country, why does Trump use tariffs?
Trump's reason is to encourage US consumers to buy goods made in America, increase tax revenue and encourage greater investment in America.
In addition, Trump wants the gap to be narrowed between the value of goods purchased by America and goods sold abroad.
He claims that most countries take advantage of America. So, these tariffs are an act for Trump to 'revenge' again.
