How tariffs work, and who pays them

When goods cross the border, the importing company pays the tax to its own government. The foreign producer is not billed and does not pay. This is a matter of mechanics, not opinion.

The importer will try to pass the cost on in higher prices. How much it succeeds depends on how easily buyers can go elsewhere. In practice, studies of recent tariff rounds found most of the cost landed on domestic consumers and firms.

That is the point of the policy: local rivals can now charge more without losing sales. The intended effect is protected jobs. The unintended one is that a protected industry has less reason to become efficient.

Other countries respond in kind, usually targeting politically sensitive exports. The net effect is generally a small loss to both economies and a large redistribution within each one, which is why tariffs are so politically potent and so economically unpopular.