Tariffs—taxes on specific imported goods—are traditionally used to correct or maintain a trade balance between countries. In principle, they can also be used to generate revenue, or as a tactic to encourage foreign governments or companies to change behavior. When the US imposes a tariff on an imported good, the company importing the good pays the tariff, or tax. Research suggests the incidence (a measure of who ultimately pays for a tariff) lies with consumers.
Economic effects of tariffs
Economists since Adam Smith have been researching and writing about tariffs for centuries. Research has consistently shown that importers pass some or all of the cost of tariffs to purchasers of imports, both households and businesses. Those buyers end up paying higher prices for those imports, potentially bringing about greater economic impacts.
As the import’s after-tariff price goes up, demand for the import can fall, which can lower the profits for the importing company or other companies relying on the imports for production or sale. In turn, this can lower incomes for those company’s employees and potentially reduce the number of available jobs they provide. Higher production costs can also make the companies products less competitive in the world market. Further, other countries could place retaliatory tariffs on a home country, making it harder for its domestic companies to sell products internationally.
Who has the authority to impose tariffs?
Article I, Section 1 of the US Constitution gives Congress the authority to regulate foreign commerce, which includes the ability to impose tariffs. However, over time, Congress has enacted various laws, upheld in several cases by the Supreme Court, which delegated Congress’s power over tariffs to the executive branch. Several current statutes allow the executive branch to impose tariffs in different situations, such as a threat to national security, discrimination against US commerce, or national emergency.
How have President Trump’s tariffs impacted the economy?
After promising increased tariff rates on the campaign trail, President Trump has expanded tariffs on various countries and goods. In recent decades before the Trump administration, tariffs were used minimally. TPC is tracking the rapidly-changing tariff types and rates, and releasing updated estimates on their revenue and distributional impact.
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Updated September 2025