As Trump pushes tariffs, here's what they do — and why economists don't like them

“The most beautiful word in the dictionary is tariff,” former President Donald Trump told the Economic Club of Chicago last week.

“The most beautiful word in the dictionary is tariff,” former President Donald Trump told the Economic Club of Chicago last week. “It’s my favorite word.”

The Republican candidate for president has spent the past few weeks floating ever higher proposals for raising surcharges on foreign goods entering the United States. He has called for a 20% blanket tariff on all imports, tariffs of at least 60% on products from China, 100% tariffs on nations that shift away from trading with the dollar, and a 2,000% tariff on vehicles built in Mexico.

Economists across the political spectrum oppose these ideas, saying the most likely outcome would be higher prices for consumers. Here’s a look at how tariffs work and why they’re so critical in an election in which living costs are front and center.

Tariffs, also known as duties or levies, are deterrents. They penalize domestic firms that import foreign-made goods to encourage companies to source more of those items within the country. When a tariff is placed on a product — be it a watermelon, a washing machine or a high-tech component — any U.S.-based company that imports it must pay a percentage of that item’s price to the government, with federal officials setting the rate.

Trump has said the revenue from these payments would be huge. He proposes using it to fund everything from tax cuts to subsidized child care. In a rambling response to a question about the latter issue last month, he said “those numbers” from tariff revenue “are so much bigger than any numbers that we’re talking about, including child care” costs.

https://www.nbcnews.com/business/economy/tariffs-economists-dont-rcna176164

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