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I have a question about the mechanics of tariffs. Never mind the question of the IMPACT now. How does the actual payment work (see below)?
Assume company XYZ is in Hong Kong and company ABC is in Long Beach, California. ABC agrees to pay money to XYZ for a shipment of widgets. The widgets are loaded onto container ships and sent across the Pacific. Is the US govt charging XYZ money? or ABC? Is it like a sales tax, where the buyer pays a bit extra before walking out of the store (or unloading the ship in this case)? Thanks.
1 Answer
- random_manLv 72 years ago
It's basically like a sales tax, as you put it.
ABC company (the American importer), has to pay the tariff in the form of a payment to the US treasury, in order to get the goods released from customs.
Sometimes, an exporter (in this case XYZ company), will lower their price a bit, in order to offset some of the cost of the tariff in order to get the sale, but in all cases, the importer ultimately pays the tax.
