An animated explanation of tariffs and how they work.
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NewsTranscript
00:00U.S. manufacturers make cars for $100, and they are selling briskly here at home.
00:10But the Chinese enter the market.
00:12They set their prices at $75.
00:15U.S. cars don't sell as well.
00:22The government decides to help the U.S. carmakers, and they slap a 100% tariff on Chinese car
00:28imports.
00:29The companies that do the importing pay the tariff to the government.
00:33They typically raise the price of their products to cover it.
00:36Now, cars from China cost $150.
00:41Consumers flock back to U.S.-made cars, and all is good again.
00:46China may even open plants to build cars in the U.S., adding U.S. jobs to avoid the tax.
00:53But China likely retaliates and slaps tariffs on U.S. goods, making them more expensive
00:59overseas and hurting U.S. exports in different industries.
01:04Increased demand for U.S. cars, and a lack of competition from other manufacturers, may
01:10motivate U.S. carmakers to raise their prices, too.
01:15The market becomes less efficient and innovative.