Tariff
How to understand Tariff.
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What is Tariff
Tariffs are taxes imposed by goverments on imported goods. In the US, American companies pay these taxes when bringing foreign products into the country, often passing some or all of the cost onto consumers through higher prices.
How the Tariff Exactly Workd in Real life
- President issue an executive order or proclamation
- The USTR and Department of Commerce provide detailed schedules, Customs and Border Protection enforce;
- Ship arrives at a U.S. port, the importer files an entry with CBP
- CBP classifies the goods using the Harmonized Tariff Scheduale of the US, which assigns a tariff rate based on the product type, origin, and any special policies
- The importer of record - usually a US based company buying the goods - pays the tariff to CBP Either at entry through an immediate payment or deferred payment who has a customs bond (typically within 10 days); The payment goes directly to the U.S. Treasury via CBP, which collects duties as federal revenue.
- Customs Clearance, once the tariff are paid or bonded, CBP releases the goods. The importer can then take possession and distribute or sell them.
- Importers must keep records for five years.
Who pay in Practice
From Tax Foundation , in Trump's first-term, 75-90% of the tariff were absorbed by US businesses and consumers, not foreign exporters.
How it Affect the Currency Rate
- Reduce demand for China's goods, shrinking China's export revenue.
- Exports drive demand for the yuan Foreign buyers convert USD to RMB, lower demand puts downward pressure on its value, pushing the exchange rate higher (7.3-7.5); Exports generate demand for yuan because US buyers convert USD to RMB to pay Chinese exporters. Decrease deman (fewer buying RMB to invest in China); In real-world international trade, US buyers typically pay Chinese exporters in USD, not RMB. The importer pay $100 to exporter, then pay $54 to CBP.
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China Manged Devaluation If the YUAN drops from 7.3 to 8, a $100 Chinese product (costing 730 RMB pre-tariff) would become $91.25, 730成本=100美元； 加关税10%，进口商要付110美元，考虑选择其他产地； 出口商要降价10%，导致进口商只为产品付90美元，外加关税10美元，构成原本的100美元； 如果汇率不降，出口商就要承担10%亏损，如果降汇率，中国要承担少赚10美元，但是出口商可以保持730人民币的收入；
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Capital Outflows Risk A weaker yuan could trigger capital flight - investors pulling money out of China - further pressuring the currency. This increases yuan supply (selling RMB for USD); Less investor demand for yuan-denominated assets (stock, bond) pushes the currency down,
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Speculative Pressure Forex traders anticipate depreciation when tariffs hit, selling yuan prrmptively. This self-fulfilling prophecy increases yuan supply in the market, driving its value lower.
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Government Control The People's Bank of China tightly manages the yuan's value , setting a daily trading band (2%)
- Stimulus Boost CHina's planned fiscal stimulus and moentary easing aim to bolster domestic demand, reducing reliance on exports. This could stablize the yuan by offsetting export losses.
What is reciprocal tariff
Key goals include:
- Reducing Trade Deficits understandS goods trade deficits (1.2 trillion in 2024);
- Pressuring Other Countries Tarfiffs are a bargaining chip to force nations like China, Canada to address issues like drug trafficking.
Trump 2.0 tariff tracker
How to Tariff execution in real world
How Trump's Tariff Work
Universal Baseline Tariff
April 5, 2025; A 10% on all imports from all contries;
Country-Specific Reciprocal Tariff
Exemptions
Where to Find the Official Docs
The White House
Office of the US Trade Representative
Federal Register
The Timeline of Trump's Reciprocal Tariff
How to connect Tariff Policy to Trade
Key Points
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Tariff alter the cost structure of goods Tariff affect trade by raising the price of imported goods.
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Influence supply and demand Importers may source from untariffed countries; US producers might ramp up output; Consumption might drop if prices spike; Tariffs reshape trade flows - where goods come from, who buys them, and at what price.
- Introduce Volatility Retailation threats or exemptions create volatility, a trader's playground.
Tariff Timeline
Feb 13: Trump signed a presidentil memorandum directing the USTR to develop a plan for increasing TS tariffs in sresponse to ohters contries's tariff
This memo set a deadline for recommendations by April 1.
April 1, USTR submit its recommendations
April 2, Trump announced the reciprocal tariff policy during a public event in the Rose Garden
This announcement included a universal tariff of 10% on all imports, with higher, indicidualized tariffs for trading partners based on their trade de=ficits with the US.
April 3, Trump signed an executive order declaring a national emergency under the International Emergency Economic Powers Act and the National Emergencies Act
It cites large and persistent US goods trade deficits as an unusual and extraordinary threat to national security and the economy. What's it practical meaning: - Expanded Presidential Power: It enable Trump to impose 1 10% and higher country-specific tariffs without immediate Congrssional approval. - DUration one year The emergency lasts one year unless renewed by the president, with Congress able to terminate it via joint resolution
12:01 a.m. EDT(12:01 p.m. CST)on April 5: 10% on all imports
Except goods in transit before this time(loaded onto a vessel at the port of loading and in final transit mode)