Every time you cross an international border, you have to go through customs. This is important because each country has its own set of import and export laws that help to control the international trade industry. While you, as a traveler, are likely not looking to make a big profit on the things you travel with—you are not planning to sell anything—these Clearit regulations help to prevent illegal trade and unfair profiting from unwanted or unsafe products. The small things you travel with are typically overlooked by customs—as long as you declare them—but larger items could be subject to certain fees and duties, often called tariffs.
What Are Tariffs?
A tariff is, quite simply, just a tax. However, the term is used to designate a tax (or fee) assigned to a product/good when it crosses an international border. Tariff amounts can vary, of course, based on the type of good being transported and the country of origin as well as the country of import.
Why Do We Pay Tariffs?
It is not quite enough to simply know what a tariff is. Specifically, tariffs are assigned as a means to hinder illegal trade or to discourage the shipping/business of dangerous goods between two countries. Essentially, a tariff helps to make foreign products more expensive, a strategy that can help to ensure product quality and safety to consumers in the home country. The hope is that a tariff will dramatically increase the price of a product so that consumers are more encouraged by local or domestic-made goods instead of goods from foreign competitors.
Why Are Tariffs Important?
Effectively, there are four ways that governments justify the assignment of tariffs:
- To Protect Domestic Industries—most importantly, tariffs protect domestic industries from potentially aggressive foreign competition. Foreign entities do not have to follow the same labor, safety, and quality regulations as those in North America, which means they can drastically undercut costs and sell products are remarkably low prices. Tariffs increase the final retail price of these products so domestic consumers are more encouraged to buy from local companies
- To Protect Emerging Industries—similarly, tariffs can protect new industries from similar types of competition. When a new company is trying to grow, tariffs help to prevent foreign companies from stealing business
- To Protect Political Trade Alliances—tariffs can also be used by governments to establish political alliances and to protect from trade violations
- To Protect Consumers—tariffs increase the price of potentially dangerous products from other countries, where regulations are not so strict