What is Tariffs?
A tariff is a tax that an importing country imposes on goods crossing its border. Tariffs can be ad valorem (% of value), specific (fixed amount per unit), or compound. They are paid by the importing company but typically passed through to consumers via higher prices. Tariff schedules are negotiated bilaterally or multilaterally (WTO, USMCA, etc.). Trade wars escalate when countries retaliate against each other's tariffs.
Why it matters for investors
Tariffs reshape supply chains, corporate profits, consumer prices, and currency values. The 2018-2025 US-China trade tensions drove companies to "China+1" sourcing strategies (Vietnam, India, Mexico). Tariffs can be inflationary (raise import prices), can hurt export-dependent companies, and can disproportionately affect commodities like steel, semiconductors, and agricultural products.