HOUSTON – Conversation around tariffs has surged after the U.S. Supreme Court recently struck down the broad global tariffs that President Trump had imposed under emergency powers, ruling they were unconstitutional because only Congress can levy taxes like tariffs.
These tariffs, including a baseline import tax and “reciprocal” duties on goods from many countries, had been a central part of Trump’s trade policy and aimed at addressing trade imbalances and other national concerns.
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The Supreme Court’s decision invalidates many of these measures, deals a significant blow to that economic agenda, and could lead to legal questions about refunds of duties already collected.
READ: Trump announces sweeping new tariffs to promote US manufacturing, risking inflation and trade wars
Before diving into the complexities of tariffs, it’s important to understand what they are, how they work, and why they are implemented:
What are tariffs?
Tariffs are taxes that governments place on imported goods. They are used to make foreign products more expensive, encouraging people to buy from local businesses instead.
When a country imposes a tariff, the company importing the product must pay a fee. That cost often gets passed down to consumers in the form of higher prices.
For example, if the U.S. puts a tariff on foreign-made cars, those vehicles could become more expensive, making American-made cars more appealing.
Reasons for tariffs
Governments use tariffs for different reasons.
Sometimes, they want to protect local industries from competition. Other times, tariffs serve as a response in trade disputes, pressuring other countries to change their policies.
Tariffs can have mixed effects. While they may help domestic businesses, they can also lead to higher prices for shoppers and tension between trading partners.
If countries retaliate by imposing their own tariffs, it can lead to a “trade war,” where businesses and consumers on both sides feel the impact.
Ultimately, tariffs are a tool that governments use to shape the economy and global trade, but they come with both benefits and risks.