Tariffs are the centerpiece of President Donald Trump’s trade policy and one of the biggest question marks facing the economy — but how much does the average American actually know about these politically polarizing tactics?
The popular game show “Are You Smarter Than a Fifth Grader?” challenges adult contestants to test their knowledge of elementary school subject matter. If you can answer the following basic questions about tariffs, then you might be smarter than a fifth grader.
Find Out: I Asked ChatGPT What Will Get More Expensive When Trump’s Tariffs Go Into Effect, Here’s What It Said
Read Next: How Middle-Class Earners Are Quietly Becoming Millionaires — and How You Can, Too
Trending Now: Suze Orman’s Secret to a Wealthy Retirement–Have You Made This Money Move?
What Are Tariffs?
Tariffs are taxes that governments apply to certain products imported from other countries.
Why Do Countries Impose Them?
Countries apply tariffs to protect domestic industries by making imports more expensive. They also use them as an economic weapon to retaliate against countries that use trade practices they perceive as unfair.
Discover More: Trump Wants To Replace Income Taxes With Tariffs: 2 Impacts on the Middle Class
Is the United States Unique in Levying Tariffs?
According to the Council on Foreign Relations (CFR), tariffs have a long history in the global economy, and nearly every country still imposes at least some tariffs on some trade partners. However, advanced economies dramatically reduced their use of tariffs after World War II, believing that they impede trade, raise prices and encourage retaliation. President Trump’s policy represents a break with that tradition.
Who Authorizes Tariffs?
According to Congress.gov, the Constitution’s Commerce Clause grants Congress sweeping power to regulate international trade. However, the Supreme Court has evolved in its interpretation of the Commerce Clause over time.
Then How Can the President Order Them?
According to the CFR, the disastrous 1930 Smoot-Hawley Tariff Act imposed nearly 900 new tariffs, which many economists believe worsened the Great Depression. As a result, Congress has spent much of the last century shifting its power to levy import duties to the executive branch.
How Do They Impact Consumers?
According to UC Davis, tariffs impact consumers in two ways.
-
First, they make products more expensive because producers raise prices to pass on the higher cost of imported goods. Additionally, domestic manufacturers that rely on imported raw materials often raise their prices to compensate as well.
-
Second, tariffs can limit the availability of certain goods by making it unprofitable to import them.
How Do They Impact Businesses?
According to the Tax Foundation, tariffs can harm businesses by disrupting global supply chains and increasing the cost of imported raw materials. However, U.S. manufacturers that source their materials domestically or from non-tariff countries can benefit because their prices become more competitive as the cost of imports rises.
More From GOBankingRates
-
I’m a Realtor: This Is Why No One Wants To See Your Home
-
3 Things Retirees Should Stop Buying To Save Money Amid Tariffs
-
How Middle-Class Earners Are Quietly Becoming Millionaires — and How You Can, Too
-
7 Wealth-Building Shortcuts Proven To Add $1K to Your Wallet This Month
This article originally appeared on GOBankingRates.com: Are You Smarter Than a 5th Grader? 7 Things You Definitely Should Know About Tariffs
