Tariffs

From dKosopedia

Category: Trade

The U.S. Constitution prohibits state and federal governments from taxing exports. The federal government may, however, tax imports. These taxes are called tariffs. Early in the Republic, customs duties on imports also known as tarriffs were the main source of revenue for the federal government. Now, the expanding scope of government, the increasing degree to which Americans add value domestically compared to the colonial era when there were few domestic industries, and a bipartisan support for free trade agreements has reduced tariff income to a small share of total federal government revenues. Most tariffs today exist primarily to protect domestic industries from unfair pricing of imports (for example, due to lack of labor laws, environmental laws and due to the presence of subsidies abroad), or as a form of sanction against governments for conduct that may have little or nothing to do with trade.

Tariffs are usually assessed either as a percentage of value or on a per unit basis. Tariffs are usually set out in large, immensely complicated schedules. How goods are classified for tariff purposes greatly impacts the amount of tax that will be paid. Tariffs also often dependent upon whether the produce was made in the U.S., Mexico or Canada, under NAFTA, or was made abroad.

The European Union is a customs union which imposes a uniform tarriff on all imports to the European Union, no matter where the goods enter the free trade area, and then imposes no tariffs on intra-union trade. Likewise, the 50 states within the United States are in a customs union with each other. In contrast, NAFTA continues to impose tariffs on trade between Mexico, Canada and the United States, but creates an exclusion for goods made in the NAFTA area.

Tariffs on politically sensitive goods, such as sugar, are usually reduced slowly, if at all. Tariffs on less politically sensitive goods, are typically reduced immediately.

There are several schedules of U.S. tariffs. Imports of most goods from most nations are taxes at a rate which used to be known as the "Most Favored Nation" rate and is now known as the "Normal Trade Relations" rate. A collection of countries that for one reason or other are viewed as having problems with the U.S., and a number of sensitive goods, are subject to higher tariffs. A handful of countries that have specially treaties with the U.S. pay little or no tariffs.