What Is a Tariff Tax in the USA and How Does It Affect Importers and Exporters?

A tariff is a tax the US government charges on goods coming into the country. Think of it as a customs fee you pay when products cross the border. Every imported item gets assigned a code from something called the Harmonized Tariff Schedule, or HTS for short. This massive book of codes tells customs agents exactly how much duty to collect on everything from headphones to tractors.​

The HTS uses a 10-digit system that gets more specific as you go. The first six digits match an international standard used by most countries. The last four digits are unique to the US and help drill down to the exact product type. Getting this code right matters because a small mistake can mean paying the wrong rate or getting your shipment held up at the port.​

Types of Tariffs Used by the United States

The US uses several kinds of tariffs, and each one works a bit differently.

Most tariffs are ad valorem, which is Latin for "according to value." You pay a percentage of what the product is worth. If you import $10,000 worth of sneakers and the tariff is 20%, you owe $2,000 in duty. Simple math that scales with the price.​

Specific duties charge a flat fee per item or per pound instead of a percentage. Sugar imports might get hit with 50 cents per kilogram, regardless of quality or market price. Tobacco and some beverages work this way too.​

Section 301 tariffs came out of investigations into countries breaking trade rules. The big one targets China after the US Trade Representative found evidence of forced technology transfers and intellectual property theft. These extra duties run from 7.5% to 25% on top of normal rates. Some products like electric vehicles from China now face a 100% Section 301 duty.​

Section 232 tariffs cover national security concerns. Steel and aluminum imports got hit with these a few years back because policymakers worried about keeping enough domestic production for military needs.

Antidumping and countervailing duties pile on when the government finds specific companies cheating. Solar panel makers and steel producers have faced these. The rates can go over 100% in extreme cases.

Here's what this looks like in practice:

Why the US Government Imposes Tariff Taxes

Money is one reason. Those billions of dollars in customs duties help fund the government. But that's less than 3% of total federal revenue, so tariffs do more as policy tools than budget items.

The bigger reason is protecting American factories and workers. If foreign steel costs less than domestic steel, tariffs close that gap. They give US producers breathing room to compete. Whether that actually saves jobs or just raises prices for everyone else is a debate that never ends.

National security drives some tariff decisions. The Pentagon wants to make sure we can produce our own steel, aluminum, and semiconductors in case of war. Section 232 tariffs aim to keep those industries alive domestically.​

Then there's retaliation. When China was accused of stealing American technology and forcing US companies to hand over trade secrets, the government responded with Section 301 tariffs on hundreds of billions in Chinese goods. It's the biggest trade action in US history, and it's still going.​

One real case: In August 2025, USTR extended tariff exclusions for 178 specific products through November 29. Companies had submitted comments showing no domestic alternatives existed. Without the exclusion, their businesses would have collapsed from the extra costs.​

Recent numbers show tariffs hitting harder than ever. By mid-2025, the average effective tariff rate hit 17.6%, the highest since 1934. That's a huge jump from the 2-3% averages we saw a decade ago.​

How Tariff Taxes Are Applied to Imported Goods

Three things determine what you pay: the right HTS code, the dutiable value, and where the product was made.

HTS classification is step one. You need to find the correct 10-digit code out of more than 19,000 options. The USITC publishes the full schedule, and it's searchable online. Get the code wrong and you might overpay or underpay. Both cause problems. Overpaying wastes money. Underpaying can trigger audits and penalties years later.​

Dutiable value usually equals what you actually paid the foreign supplier plus shipping and insurance to get it here. If you bought $20,000 worth of goods and paid $1,000 for ocean freight, your dutiable value is $21,000. Customs and Border Protection checks these numbers carefully.​

Country of origin matters a lot now. A product from Vietnam might face different rates than the same product from China. For manufactured goods, the country where the product got substantially transformed usually counts as the origin. Screwing parts together might not qualify. Turning raw materials into a finished product does.​

Let's walk through a real calculation. You import 1,000 wireless earbuds from China. The factory invoice is $20,000. Freight and insurance add $1,000, so your total dutiable value hits $21,000. Your customs broker classifies them under HTS code 8518.30.20, which normally carries a 3.5% duty. That's $735 in regular tariffs.

But here's the kicker. Those earbuds from China probably face Section 301 duties too. If they're on List 3, add another 25%. That's $5,250 more, bringing your total duty bill to $5,985. Your $21,000 purchase just became $26,985 landed. That extra $6,000 eats into your margin fast.​

CBP processes entries electronically these days. You get a preliminary bill within days. But the entry stays open for up to a year while CBP does final checks. They call that liquidation. If they find errors during that time, you might get a surprise bill or a refund.​

Who Pays the Tariff and When It Is Collected

The importer of record pays. That's the legal term for whoever brings the goods in, usually the US buyer or their subsidiary. It doesn't matter what deal you made with your foreign supplier. CBP collects from the US party, period.​

Most importers hire customs brokers to handle the paperwork. Brokers file the entries, calculate duties, and deal with CBP. They're licensed professionals who know the rules. For small companies without trade compliance teams, a good broker is essential. But the importer still carries the legal responsibility if something goes wrong.​

You have to pay estimated duties within 10 business days of filing your entry summary. Big importers need continuous bonds that guarantee CBP gets its money. These bonds can cost tens of thousands of dollars for companies importing millions in goods annually.​

About a year later, CBP finalizes everything through liquidation. That's when they issue the final duty bill. You have 180 days after that to protest if you think they got it wrong.​

There's a program called duty drawback that refunds up to 99% of tariffs you paid if you export the goods later or use them to make something you export. A furniture maker imports $50,000 worth of wood from Indonesia and pays duties on it. Six months later they export finished tables made from that wood. File a drawback claim with proper records and you get $49,500 back. It takes paperwork but the savings are real.​

How Tariffs Affect Importers in the United States

Higher tariffs squeeze profit margins. For many importers, duties are the second biggest cost after the product itself. In 2025, things got tougher. About 97% of US importers are small businesses with fewer than 500 employees. They don't have the cushion to absorb big duty increases.​

Research shows that prices for imported investment goods like machinery rose about 9.5% because of 2025 tariffs, while consumer goods went up around 2.2%. Equipment importers got hit harder than companies bringing in clothes or toys.​

You have three choices when tariffs go up. Eat the cost and accept lower profits. Pass it to customers and risk losing sales. Or push back on your supplier to cut their price. Most importers do some combination of all three. Data from early 2025 shows imported goods prices rose 5.4% while domestic goods went up 3%. That suggests importers passed through about 60% of the tariff costs and absorbed the rest somehow.​

The longer tariffs stay high, the more importers rethink their supply chains. Moving production from China to Vietnam, India, or Mexico takes time and money. You need new suppliers, new quality checks, new logistics. But if it saves you 25% in Section 301 duties, the math works out.​

Classification mistakes create ongoing risk. With 19,000+ codes and frequent changes, even big companies mess up. 

CBP audits can go back years. If they find errors, you owe back duties plus interest and maybe penalties.​

Quick checklist for importers:

• Review your HTS codes quarterly, especially when products change

• Work with a licensed customs broker who knows current rules

• Request binding rulings from CBP on major products before you commit to large orders

• Watch for exclusion opportunities when USTR opens comment periods

• Audit your import records every quarter to catch mistakes before CBP does

How Tariffs Affect Exporters Selling Into the US

Foreign exporters face a different problem. When tariffs raise the US price of their products, demand drops. American buyers delay purchases, find domestic alternatives, or just order less.​

Price negotiations get brutal. A US retailer who paid $10 wholesale before now faces $12.50 after a 25% tariff. Many demand that the exporter cut prices to $8 so the landed cost stays at $10. The exporter either accepts terrible margins or loses the customer.​

Contract terms matter more than ever. DDP means "delivered duty paid," so the seller covers import costs, including tariffs. EXW means "ex works," putting all import costs on the buyer. An exporter who quoted DDP before Section 301 tariffs hit just lost 25% of their margin overnight. Now most export quotes use FOB (free on board) or exclude special duties from DDP terms.​

Some exporters opened US operations to get around tariffs. Chinese electronics makers ship components to Mexican factories for final assembly. The finished products enter under USMCA rules instead of Section 301 rates. Others moved entire production to non-tariff countries.​

Real example: A Vietnamese furniture exporter supplied US retailers with cabinets that normally entered duty-free. When the US added a 20% tariff on Vietnamese goods in 2025, the company had to choose. Cut prices 20% and wipe out profits. Lose customers to competitors. Or spend $2 million opening a factory in Thailand. They picked Thailand to protect a $15 million annual business.

Exporters also worry about retaliation. When the US raises tariffs, other countries often fire back with their own. That hurts exporters on both sides.​

Conclusion

Tariff policy keeps changing as trade relationships shift. Importers, exporters, and compliance teams need to stay on top of it. Check the HTS database, watch USTR notices, and follow CBP guidance for updates.

Key actions to take:

• Get your HTS classifications right because that determines everything

• Factor tariffs into pricing and sourcing from the start

• Use professional customs brokers and compliance tools

• Look for exclusions and refund programs that can save real money

• Consider supply chain changes when tariffs stay above 10-15%

Trade compliance technology like Gaia Dynamics automates monitoring and classification to help you adapt faster.

FAQ

Q: Who ultimately pays US tariffs?
The U.S. importer of record pays customs duties to CBP when goods enter the country. Your contract with the foreign supplier might say they reimburse you, but U.S. law puts the legal bill on the importing party.​

Q: How do I find the HTS code for my product?
Start with the searchable HTS database at USITC. For expensive or complicated products, request a binding ruling from CBP so you know for sure. Licensed customs brokers can help with classification, too.​

Q: Can tariffs be refunded?
Yes, through duty drawback. You can get back up to 99% of duties paid on goods you later export or use to make exported products. You need detailed records and have to file within three years.​

Q: What is Section 301?
Section 301 refers to part of the Trade Act of 1974 that lets USTR investigate unfair foreign trade practices and impose retaliatory tariffs. The biggest Section 301 action targets Chinese goods with duties between 7.5% and 100%, covering hundreds of billions in imports.​

Q: How do tariffs appear on an invoice?
They don't. The commercial invoice from your foreign supplier shows the product price. CBP calculates duties separately when your broker files the entry paperwork. You get a duty bill from CBP, usually within 10 days.​

Q: When should I call a customs broker or trade attorney?
Hire a licensed customs broker if you import regularly. They'll handle entry filing, classification, and compliance. Call a trade attorney when you face CBP audits, penalty cases, or classification fights. Get professional help early and you'll avoid expensive mistakes.​