US Tariffs Explained: What They Are, How They Work, and Who Really Pays the Price
- Aaron Doswell
- 2 hours ago
- 5 min read
Tariffs may sound like a dry topic reserved for economists and trade negotiators, but they affect all of us - from the prices we pay at the shops to the stability of the global economy. With the United States making headlines once again for its tariff policies, particularly under President Donald Trump, now is the perfect time to understand what tariffs are and why they matter.
In this article:
What Exactly Is a Tariff?
In the simplest terms, a tariff is a tax that a government places on goods coming into a country from abroad. Think of it like an added cost on foreign products. The idea is that by making imported items more expensive, consumers might be more likely to buy home-grown alternatives. It's a way to protect local industries from overseas competition.
For example, if the US places a 25% tariff on Chinese electronics, that means a laptop imported from China becomes 25% more expensive for the company bringing it in. And guess what? That cost usually gets passed on to the consumer - you.
How Do Tariffs Work in Practice?
Tariffs are paid by the importing company at the border. However, it doesn't stop there. These companies typically increase the retail prices of their goods to cover the added costs. So, while it might seem like a tariff is a tax on a foreign business, it's actually local consumers and businesses that bear the brunt.
In essence:
Importers pay the tariff upfront
Retailers adjust prices accordingly
Consumers feel it in their wallets
And it's not just about higher prices. Tariffs can lead to disruptions in supply chains, lower product variety, and even job losses in industries that rely on imported materials.
Who Feels the Impact?
Tariffs may be aimed at foreign countries, but they have a ripple effect that spreads far and wide:
Consumers end up paying more for everyday goods, from electronics to clothing to groceries.
Businesses - especially small ones - face higher costs for parts and products, making it harder to compete and stay in business.
The Global Economy can suffer from reduced trade, economic slowdowns, and rising tensions between countries.
The US Tariff Story: What’s Happening Now?
Tariffs have been a cornerstone of recent US trade policy. Under Donald Trump’s presidency, sweeping tariffs were introduced - particularly targeting Chinese imports - as part of a broader “America First” economic agenda. These moves were intended to bolster US manufacturing but ended up sparking trade disputes and economic uncertainty.
According to a recent BBC report, the result has been dramatic: US-China merchandise trade is projected to fall by 80% this year. Such a drop highlights the extent to which tariffs can reshape international commerce.
Meanwhile, the independent notes that market jitters have increased, especially as investors weigh the long-term effects of Trump’s policies alongside concerns about inflation, interest rates, and the strength of the US dollar.
On a somewhat hopeful note, Yahoo Finance reports hints at easing tensions, with talks of de-escalation in the US-China trade war and progress in trade negotiations with countries like India. Still, the road ahead is uncertain.
Why Should You Care?
Whether you're a business owner trying to manage rising costs, a shopper noticing price hikes, or simply someone curious about global affairs—tariffs affect you. They influence what you buy, how much you pay, and how stable the economy feels.
In a world more connected than ever, trade policies in one country can send shockwaves across the globe. Understanding tariffs is no longer just for economists—it’s essential knowledge for all of us.
In the end, tariffs are more than taxes—they’re tools of economic strategy that come with real-world consequences. And as the US continues to navigate its place in the global trade system, we’ll all be watching closely to see who really wins—and who pays the price.
How RC plans to Navigate it
Reign Capital Limited’s investment department shall continue with its stance of wait and see approach as we believe our Portfolios are well balanced to sustain such events. This approach has proven to be the right one so far as our “Buy and hold” funds are doing well. Nevertheless, we shall continue to monitor market activity and adjust our thinking if needed.
Email: info@reigncapital.co.uk
UK Phone: +44 7572 513332 | PT Phone: +351 9390 79132
United Kingdom Address: 37th Floor, 1 Canada Square, Canary Wharf, London, E14 5AA. Portugal Address: Avenida da República 50, 2nd floor, Lisbon, 1050-196, Portugal.
For more information please visit: https://www.reigncapital.co.uk/insights
Disclaimer:
This publication has been prepared by the Investment & Proprietary Trading Department of Reign Capital Limited. (“RC”) solely for information purposes without regard to any particular user's investment objectives, financial situation, or means. The information in the publication is not an investment recommendation and it is not investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Reasonable care has been taken to ensure that this publication is not untrue or misleading when published, but RC does not represent that it is accurate or complete. RC does not accept any liability for any direct, indirect or consequential loss arising from any use of this publication. Unless otherwise stated, any views, forecasts, or estimates are solely those of the author(s), as of the date of the publication and are subject to change without notice. The distribution of this publication may be restricted by law or regulation in different geographical jurisdictions and persons into whose possession this publication comes should inform themselves about, and observe, such restrictions. Copyright and database rights protection exists in this report and it may not be reproduced, distributed or published by any person for any purpose without the prior express consent in writing of RC. Reign Capital Limited is an Institute of Trading and Quant Global Macro Management firm registered in England and Wales under registered number 12937913. Reign Capital Limited authorised and regulated by FCA Hosting Licence in strategic partnership with Pelican Asset Manager / London & Eastern LLP (authorised and regulated by the FCA, FRN: Number 534484), and brokerage alliance with AXI / AxiCorp Limited (authorised and regulated broker in the UK by the FCA). Our registered address is at Office 3.05, 1 King Street, London, EC2V 8AU, United Kingdom. Investors' capital is always at risk.
