What Are Tariffs? Definitions, Types, and Their Impacts to the Economy

Liputan6.com, Jakarta - You may have often heard that President Donald Trump imposed tariffs on some countries, but what are tariffs? Tariffs are taxes that a government puts on goods coming from other countries. Many people around the world want to understand what tariffs are because they can change the prices of products that people buy every day.

So, what are tariffs and why do they matter? When a government adds tariffs to imported goods, those goods become more expensive in stores. This can affect many people, from business owners to regular shoppers. Knowing what tariffs are can help you understand news about trade and the economy better.

In this article, we will explain what tariffs are, how they work, and their positive and negative effects on the economy and consumers. We gathered the information from various sources, Monday (18/5/2026). This will help you understand why tariffs matter in today's world.

A tariff is a tax that a government places on goods imported from other countries. When a country imposes a tariff, it makes foreign products more expensive. This encourages consumers to buy products made in their own country instead of imported ones.

There are four main types of tariffs:

1. Ad Valorem Tariffs: These are based on a percentage of the value of the imported goods. For example, if you import a product worth $100 and there is a 10% tariff, you will pay $10 in tax.

2. Specific Tariffs: These are fixed amounts charged per unit of goods. For example, if there is a $1 tariff on each imported avocado, you will pay $1 for every avocado you bring into the country.

3. Tariff-Rate Quotas: These allow a certain amount of goods to be imported at a lower tariff rate. Once that amount is exceeded, a higher tariff applies.

4. Compound Tariffs: These combine both ad valorem and specific tariffs. For example, an imported product may have a fixed charge plus a percentage of its value as the tariff.

Tariffs can vary depending on the type of product and the country it comes from. They are collected by customs officials when goods enter the country.

Tariffs work by increasing the cost of imported goods. When tariffs are imposed, companies that import these goods must pay the tax to the government. This cost is often passed on to consumers in the form of higher prices.

For example, if a company imports shoes from another country and there is a 20% tariff on those shoes, the company pays more for them. To cover this cost, the company may raise the price of the shoes in stores. As a result, consumers end up paying more for these imported shoes.

Tariffs can also affect domestic industries. When foreign products become more expensive due to tariffs, consumers may choose to buy locally made products instead. This can help local businesses grow and create jobs.

However, tariffs do not always lead to positive outcomes for everyone. While some local industries may benefit from reduced competition from foreign products, other industries that rely on imported materials may suffer from increased costs.

There are several positive effects of tariffs:

1. Protecting Local Jobs: Tariffs can help protect jobs in domestic industries by making it harder for foreign companies to sell their products at lower prices. This means that local workers may keep their jobs because consumers will choose domestic products over more expensive imports.

2. Encouraging Local Production: When foreign products become more expensive due to tariffs, consumers may choose to buy locally made items instead. This can boost local businesses and encourage them to produce more goods, leading to greater investment in domestic manufacturing capabilities.

3. Increasing Government Revenue: Tariffs generate income for the government through taxes collected on imports. The money collected from tariffs can be used for public services like education and healthcare, which benefits society as a whole by funding important programs.

4. Reducing Trade Deficits: By making imports more expensive, tariffs can help reduce trade deficits (when a country imports more than it exports). This can strengthen the economy over time by encouraging exports and improving trade balances with other countries.

5. Promoting Fair Trade Practices: Tariffs can be used as a tool against unfair trade practices by other countries. If a country subsidizes its exports or sells them at very low prices (dumping), placing tariffs can level the playing field for domestic producers who compete fairly without such advantages.

While there are benefits to tariffs, there are also negative effects:

1. Higher Prices for Consumers: The most immediate effect of tariffs is that they increase prices for consumers across various sectors. Imported goods become more expensive due to added taxes, which means people have to pay more for everyday items like clothing or electronics than they would without those tariffs.

2. Retaliation from Other Countries: Countries affected by tariffs may respond with their own tariffs on U.S. goods as retaliation. This can lead to trade wars that hurt both economies and result in even higher prices for consumers who rely on international trade for affordable products.

3. Impact on Domestic Industries: Not all domestic industries benefit from tariffs; some may suffer due to increased costs for raw materials that are imported from abroad. Industries that rely heavily on these materials may see reduced profits or even job losses as their operational costs rise due to higher input prices.

4. Economic Inefficiency: Economists argue that tariffs can lead to inefficiencies in the economy by protecting less competitive industries at the expense of consumers who pay higher prices for goods that could be cheaper if produced abroad without such taxes applied.

5. Job Losses in Some Sectors: While some jobs may be protected by tariffs in certain industries, others may be lost in sectors that rely heavily on imports or exports affected by retaliatory measures from other countries imposing similar taxes on U.S.-made goods.