Anxiety over the outcome of the upcoming presidential election has bled into the U.S. trade community. While campaigning for the highest office, former President Donald Trump has proposed higher tariffs on foreign-made goods as an economic policy to offer U.S. industries respite from cheaper overseas markets, namely China.

Trump’s proposal would double down on aggressive tariffs towards China imports he implemented while president, a program still in place by President Joe Biden.

The Republican presidential nominee has touted further hikes to tariffs as a way to draw more revenue from exporting countries paying the would-be higher taxes, while also boosting domestic production. However, opponents of the proposal, which include U.S. importers, argue the former president misunderstands how import taxes work.

“Tariffs are paid by the importer and not the producing country, and that is passed on to the consumer. It’s a tax paid by the consumer,” said Matt Shay, chief executive of the National Retail Federation, the largest U.S. retail trade group.

So, how do tariffs work? Can they be levied at the expense of exporting countries to shore up U.S. production and its economic competitiveness? Or are they unnecessary taxes at the expense of the U.S. importer and, by extension, the consumer?

Well, like most contentious topics during the election cycle, tariffs have a reasonable function that straddles the fence of divisive opinions fanned by heightened political rhetoric. 

By definition, tariffs are taxes on foreign-made goods paid by the importing business to the home country’s government. In the case here, it would be U.S. importers who would pay the tax to the U.S. government.

Historically, tariffs have been used to curb foreign markets in favor of supporting domestic industries. These intended effects are what Trump has promoted in his trade policy. However, generally speaking, as countries continue to globalize, the practice is deployed more sparingly in the present day as they can lead to reduced trade, frayed relations, and higher prices for consumers. While tariffs are designed to protect domestic industries, the U.S. is the world’s largest importer which complicates their impacts on American consumers, a point of emphasis retailers have made against Trump’s proposal.

While there are exceptions to how their amount can be calculated, tariffs are typically imposed as a fixed percentage of the value of the imports. Considering the scope of U.S. import activity, tariffs function as a steady source of government revenue.

By and large, most countries impose tariffs to some extent. Higher tariffs are more likely imposed by lower income, less developed, countries, while higher income, more developed, countries maintain lower tariffs in comparison.  

These import taxes are not one-size-fits-all charges. The amount, usually imposed by a percentage, is attached to the classification of goods. Certain commodities, or industries as a whole, are susceptible to higher tariffs in the U.S. For example, the automotive and sugar industries have been fortified with tariffs for decades.

However, while the U.S. boasts strong production of cars and manufactured sugar, the country’s supply chains are seldom self-reliant in other areas of industry—most notably, retail—and defer to cheaper means of production overseas.

Most clothing, footwear, electronics, toys, and other retail products available across U.S. stores hail from factories in China, as well as Southeast Asia and India. Given small profit margins, retailers usually adjust to higher tariffs by passing on the bulk of the added cost on to consumers. 

This unintended consequence arising from the country’s distinction as a heavy importer challenges the logic of tariffs being implemented in certain industries. Can the price of consumer goods increase as a result and still be interpreted as good for the U.S. economy?

A specific understanding of which industries would be targeted by former President Donald Trump’s proposed tariff increases would be valuable to know. The Trump administration imposed several rounds of tariffs on steel, aluminum, washing machines, solar panels, and goods from China. The Biden administration has since maintained most of these tariffs