Tariffs: Impacts on Trade and International Relations

The concept of tariffs has become a hot topic in recent years. Tariffs are taxes imposed by a government on imported goods and services. They are often used to protect domestic industries, raise government revenue, or influence trade relationships. However, it’s important to recognize the potential harms and benefits that tariffs impose.

Economic Impacts

One of the major purposes of tariffs is economic change. By definition, tariffs are taxes on international goods. Countries targeted by tariffs have seen significant economic setbacks due to the ripple effect of such taxes. For example, China has just announced a significant investment in special treasury bonds due to the imposition of the US tariff. It's important to recognize that investments can sometimes be risky, but often, if done correctly, can offer extra economic support for countries enduring tariffs. Additionally, while the economic consequences of tariffs on victims are clear, the benefits for the imposing side are less clear. Tariffs can economically affect countries in two key ways: generating government revenue and impacting consumer prices. One of the most beneficial is that extra money is received by their government, leading to further funds for vital infrastructure and investments. However, another concern associated with tariffs is consumer price increases. Due to increased taxes, many tariffed goods rise in price, which can harm consumers and the consumer market. When this happens, certain industries and even country economies can see drops in revenue.

International Relations

The most pressing impacts of tariffs involve international relations. While tariffs have pretty clear economic impacts, the implementation can also be used to diffuse conflict or create additional strain. One way tariffs can be used to diffuse conflict is through using tariffication threats as a bargaining chip. For example, recently, the US threatened tariffs on Mexico to reduce drug trafficking into the US. This had significant impacts on border security, ultimately leading to the diffusion of a long-lasting issue between the US and Mexico. However, while threats can be beneficial, they can also create dangerous trade wars and increased tensions. In the US-China trade systems, the implementation of tariffs has led to major trade wars, in which both countries increase tariffs on each other's goods, therefore leading to economic harm and strains on trade relations for both countries. Overall, these impacts not only affect governments but also economies and their respective populations (through consumer prices).

Conclusion: Why Does This Matter?

While there are plenty of impacts, these are some of the clearest impacts. Tariffs can be complex to understand; however, understanding them is fundamental, especially in the current complexity of international economies. Tariffs are a major part of modern international trade, and their impacts play a profound role in worldwide economies. In today’s global economy, understanding tariffs is crucial—not only for economists, but for anyone who aims to make sense of global trade, politics, and what's happening in their economies.

Sources:

Image of a tariff code chart. DHL, https://www.dhl.com/discover/content/dam/malaysia/top-10-sites-visual-refresh/tariff-code/1920x998-Tariff%20Code-Thumbnail.jpg. Accessed 7 May 2025