A tariff is a tax imposed on products imported from another country. Usually tariffs are narrowly focussed to counter protectionist policies in another country, or when a foreign company is flooding the market with cheap, subsidized goods that our domestic companies cannot compete with. If American companies are ascendant in a certain category, tariffs are unnecessary in that category.
Who Pays For a Tariff?
The importer pays the tariff. This effectively raises the cost to the importer, who can pass the cost on to the consumer, or accept a lower profit on their sales. The exporter isn't paying the tariff, but they are still affected since the high price for the end user will effect sales.
What is the Goal of a Tariff?
Ideally, a tariff is set to counter prices for foreign made goods that are well below the cost of American products. Often the low price is the result of government subsidies in the originating country, resulting in an "unfair" price difference. The tariff brings the foreign and domestic products closer to parity, with the goal of supporting American business. Foreign countries may impose tariffs on American goods as a way to jump start their own home grown industries.
What is "Balance of Trade"?
The dollar value of imports and exports are rarely equal. When what we buy from another country's businesses exceeds what our businesses sell to that country we have a trade deficit with that country. When the reverse is true we have a trade surplus.
What Is Trump Doing?
Since his first term Trump has not understood what trade imbalances were. He has consistently described trade deficits as "losing money" to the country with whom we had a trade deficit. He has drawn the conclusion that because we have trade deficits, these countries are "not being fair", or are "ripping us off". Trump's tariffs take two forms. The first takes the form of punishment for actions the other country has taken that he doesn't approve of, or a negotiating tactic to bring them in line with his goals. An example would be his perception that fentanyl is pouring over our northern and southern borders -- tariffs on Canadian and Mexican products are used to twist our neighbors' arms to get them to step up their border security; even if in this case hardly any fentanyl comes in from Canada. The second, which he calls reciprocal tariffs, are a response to trade deficits that we have with the targeted nations.
How Are the Trump Tariffs Calculated?
The tariffs are not, as first assumed, mirror images of tariffs being imposed on U.S. businesses. The tariff rates are based on the ration of imports and exports between the United States and the target country. For example, if we export 25 billion to Tariffland, and import 35 million, 35/60 is 58.33%, which is the new tariff rate. One article called this calculated "childish", I would add "foolish" and "ignorant", maybe "simplistic".
How Crazy Is All of This?
Trump thinks tariffs are the answer to most of our problems. It's the hammer when every problem looks like a nail. Some of Trump's supporters are reverse engineering his senseless policies by attempting to pin some kind of rationality on the irrational. Trying, through convoluted illogic, to hallucinate some kind of reason why any of this makes sense. You'll grow old trying to find any kind of policy coherence in anything Trump does. There are more holes in his "logic" that anyone could count before the heat death of the universe. The reason for any of this is Trump's personality. One aspect is his simplistic thinking. He can't conceive of complex systems or relationships. It's why he seems incapable of considering how interconnected our economy is with the rest of the world. He has no empathy for others. He doesn't care that his plans will cause inflation or cause businesses to shut down -- not his problem. Finally, despite his opulent lifestyle, he can't help painting himself as the victim that "everyone" is out to bring down. He sees other countries, not as partners who can mutually benefit from cooperation, but as enemies out to "rip us off". These personality traits have been front and center throughout his life, demands loyalty, but is not loyal to others. His own needs are the first, if not the only things he considers.
It all makes sense when you put it all in context of one man's twisted psyche.