this post was submitted on 06 Apr 2025
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Explain Like I'm Five
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It's an import tax on imported goods.
I'm the CEO of the Orange Company, an American company. I sell oranges for $1. It's the winter and Florida has no oranges for me to sell. So I call up a business in South America and have them send me oranges, $1 million of oranges.
The Orange Company pays them $1 million. When the oranges arrive in the US, the US Federal government charges me a 10% tariff on my imported oranges - $100k. The Orange Company pays the US government a 10% tariff, or $100k, for importing $1 million of oranges.
I then sell my oranges to American consumers. Because my cost of goods went up, I can't sell for $1 anymore. So I pass on the 10% increase in orange cost to my customers by selling oranges for $1.10.
That's what a tariff is, how it works, and how it is effectively a sales tax.