A tariff is a tax a government puts on goods crossing its border. In the United States, the importing company pays it — not the foreign seller. U.S. Customs and Border Protection collects the duty, and the importer typically pays within 10 days of the goods clearing customs, according to GovFacts.
But paying the tax and bearing the cost are two different things. The importer usually passes some or all of the duty to its customers through higher prices. So the real burden lands on American businesses that buy imported parts and on households that buy imported goods. That is the short answer to how tariffs work: a tax at the border, paid by the importer, priced into everything downstream.
What does a tariff actually do at the border?
Think of a tariff as a wedge between what a foreign seller receives and what an American buyer pays. If a U.S. company buys a product from an overseas supplier for $100 and the government imposes a 25% tariff, the buyer owes the supplier $100 plus a $25 tax to the U.S. government. The total cost becomes $125. The seller still gets $100.
That wedge is the point. It makes imports more expensive, which pushes buyers toward domestic alternatives. Governments impose tariffs to raise revenue, protect domestic industries, or pressure another country to change its behavior, per Investopedia. All three motives show up in modern U.S. policy, and they often overlap in a single action.
The mechanics run through customs paperwork. Every shipment is classified under a 10-digit Harmonized Tariff Schedule code, and the duty owed depends on that code, the country of origin, and the entry date. Our explainer on how customs collects tariffs walks through the bond-and-entry system small importers actually deal with.
What are the three ways a tariff gets calculated?
Not all tariffs work the same way. The method of calculation changes which goods get hit hardest and how predictable the costs are for importers.
- Ad valorem — a percentage of the good's value. This is the most common type for manufactured goods. The U.S. charges 2.5% on most imported cars, which adds $750 to a $30,000 vehicle, per GovFacts. Because the tax scales with value, protection stays constant even when prices move — but importers face unpredictable costs when prices or currencies swing.
- Specific — a fixed fee per unit, weight, or volume, regardless of price. The U.S. charges $0.51 on every imported wristwatch, whether it costs $40 or $5,000. Predictable for planning, but the burden is proportionally heavier on cheap goods.
- Compound — both at once. Certain imported footwear faces 5% of value plus $1 per pair. A 1,000-pair shipment valued at $50,000 owes $3,500 in duty.
The taxable value often includes more than the product's price. Under the Cost-Insurance-Freight method, freight and insurance to the destination port can count too, according to GovFacts.
Who really pays a tariff?
The importer pays first. Then the question is how much of the duty gets passed along, and to whom. The economic burden is shared among the importer, the exporter, and the consumer, according to Wikipedia's tariff entry. Exporters may cut their prices to stay competitive in the U.S. market. Importers may absorb part of the cost in their margins. The rest shows up in prices.
Our earlier piece on who actually pays a tariff traces that pass-through in detail, and a companion article covers how importers pay tariffs and then pass them on.
There are second-order costs too. Tariffs can hurt the very industries they aim to protect by raising the cost of imported inputs, and they can disrupt supply chains for domestic exporters. An attempt to pressure a trading partner can also trigger retaliation — a cycle commonly called a trade war, per Investopedia.
What do tariffs look like in 2026?
Current U.S. duties arrive as a stack, not a single headline rate. The base duty from the Harmonized Tariff Schedule sits at the bottom, and each trade program adds its own layer on top, according to the US Tariff Tracker 2026.
The largest layers as of late 2026:
- Section 232 — 50% on steel, aluminum, and copper, raised from 25% effective April 6, 2026. It covers derivative products, though per the tracker, UK-origin steel and aluminum remain at 25%.
- Section 301 on China — rates from 7.5% to 100% depending on the product. Electric vehicles sit at 100%, solar at 50%, semiconductors at 50%, steel and aluminum at 25%, most other goods at 25%.
- A Section 301 forced-labor action — effective July 24, 2026, adding 10–12.5% on most products of 60 economies, including a further 12.5% on China that stacks on the list rates.
The layers add up. The tracker's worked example: Chinese steel rebar faces a free base duty plus 25% under Section 301 plus 50% under Section 232 — a 75% effective rate. A $10,000 shipment of Chinese woven apparel owes $550 in base duty plus $2,500 under Section 301, or 30.5% total.
Timing matters as much as the rate. A 10% global surcharge imposed under Section 122 of the Trade Act of 1974 expired by operation of law at 12:01 a.m. ET on July 24, 2026 — the 150-day statutory maximum, with no extension by Act of Congress. Liability turns on the entry date: goods entered on or after that date owe no surcharge.
For a small importer, the operating lesson is blunt. The policy headline is not the answer. The product code, the origin, and the entry date are. Our guide to the new Section 301 duties breaks down the current layers, and how a tariff actually gets set in law explains why rates change through proclamations and court rulings rather than one clean vote.
How much money do tariffs raise?
Tariffs are real revenue for the federal government. The U.S. collected $40.6 billion in customs duties in 2018 and $71.9 billion in 2019 after tariffs were imposed on a broad range of goods, per Investopedia. Revenue rose sharply through the 2020s as tariffs were maintained and expanded, reaching approximately $264 billion in 2025.
That revenue comes from American importers, though. It is a transfer from U.S. buyers of foreign goods to the Treasury, not a payment from abroad. Whether that trade-off is worth it is the standing argument in every tariff debate.
What this means for your business
If you import, the practical steps are the same regardless of the political fight:
- Confirm the 10-digit HTS code for each product you bring in. The code, not the headline, determines the rate.
- Check the country of origin. Origin rules decide which programs apply, and origin can be engineered — our piece on nearshoring covers how sourcing shifts respond to duty gaps.
- Watch entry dates against program effective dates and expirations. The Section 122 surcharge turned entirely on when goods were entered.
- Estimate landed cost — duty layers plus fees, freight, and value — before committing to a shipment.
One more layer to watch: antidumping and countervailing duties are separate, case-specific risks that apply on top of everything above. They are not a universal percentage, and they can arrive after a purchase order is already signed. Our explainer on how an antidumping case actually works covers that process.
The evidence supports a narrow set of conclusions. Tariffs are paid by importers at the border, priced through to businesses and consumers, and collected in growing volume by the Treasury. What the data does not settle is how the burden splits among exporters, importers, and shoppers in any given case — that split depends on market power, contracts, and margins, and it varies product by product.
