Tariffs and trade, explained

Countries trade because each is better at making some things than others. The U.S. sells planes, software and soybeans to the world, and buys phones, clothes and cars from other countries. Trade usually means more choices and lower prices.

A tariff is a tax on goods brought in from another country. If the U.S. puts a 25% tariff on an imported item worth $100, the company importing it pays $25 to the U.S. government when it arrives.

Who really pays? The importer pays the government, but the cost usually gets passed along, at least partly, to shoppers as higher prices. Sometimes the foreign seller cuts its price to stay competitive, or the importer takes a smaller profit. Economists have found that in recent U.S. tariffs, much of the cost landed on American businesses and consumers.

Why use them? Governments use tariffs to:

• Protect jobs in industries at home by making imported goods more expensive.
• Pressure another country in a trade dispute.
• Raise money for the government.

There are trade-offs. A tariff on imported steel can help U.S. steelmakers but raise costs for companies that use steel, like carmakers. Other countries often hit back with tariffs of their own, which can hurt exporters like farmers.

North Carolina is a good example. Its farms, factories and ports ship goods all over the world, so trade decisions made far away can change prices and jobs close to home.

Watch for it in the news: new tariffs, trade deals, and companies explaining price increases.