What Are Tariffs and How Do They Work?

A tariff is a tax a country imposes on goods it imports from another country—essentially a polite way of saying, “We’d love to buy your stuff, but first we’d like to make it worse for everyone.”

Tariffs were invented centuries ago by governments looking for ways to raise money without admitting to their citizens that taxes already existed. The basic idea is simple: if a foreign nation sends you, say, a perfectly good toaster, you slap a fee on it before letting it in. This makes the toaster more expensive, which encourages citizens to buy the domestic toaster instead—despite the fact that it has a tendency to burst into flames and hum the national anthem while doing so.

Politicians often describe tariffs as tools to “protect domestic industries.” What they rarely mention is that these industries often need protection because they’re about as competitive as a damp sponge at a sword fight. The theory goes that tariffs give local businesses time to “catch up.” The reality is that they often use that time to take long lunches and produce lobbying reports about how much catching up they’re doing.

Internationally, tariffs tend to trigger what economists delicately call a trade dispute, and what historians will one day file under idiotic slap fights between very large economies. The usual sequence goes like this: Country A imposes tariffs on Country B. Country B retaliates with tariffs on Country A. Both declare victory while their citizens quietly pay more for bread, cars, and happiness. Meanwhile country C prospers and makes trade deals with both Country A and Country B, before taking over the world’s economy while the other countries were fighting over toasters.

Supporters of tariffs claim they create jobs. They do—just not where anyone expects. Entire industries spring up to handle the paperwork, legal battles, and press conferences that tariffs generate. Economists working in this field have been known to emit small sighs of joy every time a new one is announced, because it means another 400-page report about why this particular tariff “may or may not” work.

In summary, tariffs are a financial boomerang thrown at foreigners that, with unerring precision, hits the thrower in the wallet. They are the economic equivalent of declaring that everyone will be richer if only things were more expensive.

It should be noted that Tariffs only exist on planet Earth for the simple reason that humans are an interesting bunch. While the populations of most planets have one group of people obliterate all other groups out of sheer xenophobia and dominance or reach a place where all groups get along with each other, Earth lives in the middle-ground where the majority of the planet favors peace but also craved independence from the rest of the planet.

While scholars throughout the universe have speculated many reasons for this strange inability to either obliterate or come together, the leading explanation has to do with the Earth’s yellow sun and blue skies, which tend to give the inhabitants of the planet something to think about other than world domination and distract them from forming meaningful bonds with other cultures on their own planet.

(Editor’s Note: Tariffs are proof that nationalism and math rarely attend the same parties.)