Tariff Meaning: Import Taxes, Rate Lists and How Tariffs Work

Tariff meaning in its two main senses

1. A tax on traded goods. A charge a government places on imports, and less often on exports. It is collected at the border by customs officials.
2. A schedule of rates. A published list of what something costs, such as charges for power, phone plans, train fares or hotel rooms. You might hear "the new tariff starts in April" from a power company.

When people in the news talk about tariffs between countries, they nearly always mean the first sense.

How a tariff works: a worked example

Imagine a company in the United States buys 1,000 bicycles from a factory abroad for $200 each. That is $200,000 worth of goods.

• The government sets a 25 percent tariff on imported bicycles.
• When the shipment arrives, the importing company pays 25 percent of $200,000, which is $50,000, to customs.
• Each bicycle now costs the importer $250 instead of $200.
• The company may raise its shop price, accept a smaller profit, ask the foreign factory for a discount, or buy from a local maker instead.

Note who writes the cheque: the importer pays the tariff, not the foreign country. How much of the cost ends up with shoppers, the importer or the foreign seller depends on the market, and economists study this closely.

Types of tariffs

Why governments use tariffs, and why people disagree

Supporters of tariffs say they can protect local industries and jobs from cheaper foreign competition, raise money for the government, encourage factories to stay or return, and give a country leverage in trade talks.

Critics say tariffs raise prices for buyers and for businesses that rely on imported parts, can invite retaliation that hurts exporters such as farmers, and may shelter companies that would otherwise need to become more efficient.

Most economists agree tariffs have costs, but they disagree about how large those costs are and when the benefits are worth it. The answer often depends on the industry, the size of the tariff and how other countries react. A related idea is inflation, since tariffs can affect the prices people pay.

Tariff definition in example sentences

• The government announced a tariff on imported solar panels to support local makers.
• Our electricity tariff went up, so the monthly bill is higher even though we used the same power.
• The trade deal cut tariffs on fruit and textiles between the two countries.
• The hotel's room tariff is lower in the monsoon season.
• Importers rushed to bring goods in before the new tariffs took effect.

Tariff, duty, tax and quota

A duty or customs duty means almost the same as a tariff, and the words are often swapped. Tax is the broad word for any money a government collects. A quota is different: it limits how much of a product can come in, rather than charging money on each unit. An embargo goes further and bans trade in certain goods or with certain countries.

Spelling tip: tariff has one r and two f letters. People often write "tarrif" or "tarif" by mistake. The verb form is rare; most writers say "impose a tariff" or "place tariffs on".

Word history

English took tariff from French tarif in the late sixteenth century, which came from Italian tariffa. The Italian word traces back through Ottoman Turkish and Persian to the Arabic ta'rifa, a word linked to making something known, as in a published notice of rates. Early English uses meant an arithmetical table or a list of charges; the trade tax sense grew from that idea of an official schedule. Other money words live in the business and finance collection, or try budget and revenue.