What is a Tariff?
A tariff is a tax that governments place on imported or exported goods. When goods cross a country's border, tariffs add an extra cost to them. For example, if a country puts a 20% tariff on shoes coming from another country, the shoes become 20% more expensive when they arrive. This extra cost is usually paid by the importer or passed on to the consumer.
How Tariffs Affect Prices
Tariffs make imported goods more expensive because of the added tax. When foreign products cost more, local products become more price-competitive. This can help domestic businesses sell more products, but it also means consumers pay higher prices. For example, if imported cars have a high tariff, people might pay more money to buy a foreign car compared to a locally-made one.
How Tariffs Affect Trade Between Countries
Tariffs reduce the amount of trade that happens between countries. When goods are taxed heavily, fewer people want to buy them because they cost too much. This means less trading overall between countries. If Country A puts high tariffs on goods from Country B, then Country B may put high tariffs back on goods from Country A. This back-and-forth can hurt both countries' economies.
Why Governments Use Tariffs
Governments use tariffs for several reasons. First, tariffs protect local businesses and workers from competition with cheaper foreign products. Second, tariffs generate money for the government through tax revenue. Third, tariffs can be used as a negotiating tool in trade disputes between countries. However, tariffs can also harm consumers by raising prices and reducing choices.
Examples of Tariffs
Countries commonly use tariffs on agricultural products like sugar and wheat, manufactured goods like clothing and electronics, and raw materials like steel and aluminum. The United States, European Union, and China all use tariffs on various products to protect their industries and manage trade. 
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