How Tariffs Work and Their Ripple Effects on the Economy

3. Tariffs Target Goods, Industries, and Global Trade

Not all tariffs are the same.

• Ad Valorem Tariffs: Charged as a percentage of a product’s value. A 10% tariff on a $500 smartphone adds $50 to its cost.
• Specific Tariffs: A fixed fee per unit. For example, a $2 tariff on each pair of imported shoes applies regardless of their price.
• Compound Tariffs: A mix of both. An imported car might face a 5% tariff on its value plus a $1,000 flat fee.

Each type allows governments to meet specific goals, such as generating revenue or shielding critical sectors like technology or agriculture from foreign competition.