Glossary · Economy
Tariff
A tariff is a tax on goods brought in from another country, paid to the government by the importer when the goods cross the border.
Also called: tariffs, import tax, customs duty, import duty
Customs duties ÷ goods imports, Q3 2026.
An average rate of 8.0%, against 2.6% the year before.
In plain words
A store imports bikes for $200 each. If the government sets a 25% tariff, the store must pay $50 per bike at the border before it can sell them. A tariff is a tax on imports.
Governments use tariffs to raise money, to shield home industries from foreign competition, or as a bargaining chip in disputes. For most of the 1800s, tariffs were the US government’s main source of revenue.
The average US tariff, all customs duties divided by all goods imported, was 8.0% in 2025. That was the highest since 1946. In Q3 2026 it was 6.8%.
Example
Who pays a 25% tariff?
- Before: a bike costs the importer $200 and sells for $300.
- A 25% tariff adds $50 at the border: the importer now pays $250 in all.
- If the shop passes it all on, the price rises to $350 and buyers pay. If the foreign maker cuts its price to $180 to keep the sale, the tariff is $45 and part of the cost falls abroad.
- Meanwhile a home-made bike at $320 looks cheaper, so the home maker sells more and may raise its own price.
Who bears a tariff depends on how easily buyers and sellers can switch. Studies of the US tariffs of 2018–19 found that almost all of the cost was passed on to US importers and buyers.
One level deeper
A tariff helps the protected industry and adds to government revenue; it costs the buyers, and the industries that use the imported goods as parts. Other countries often retaliate with tariffs of their own, which hurts exporters. Most economists think broad tariffs make a country poorer overall; views differ more on narrow ones, for example on national-security grounds.
History: the Smoot–Hawley Tariff Act of 1930 raised US duties as the Great Depression began, other countries retaliated, and world trade shrank. Average US tariffs peaked at 18.7% in 1933, partly because many duties were fixed dollar amounts that weighed more as prices fell. After 1947, rounds of talks under the GATT, and from 1995 the World Trade Organization, cut tariffs worldwide; the US average fell to a low of 1.4% in 2008.
The average understates the bite on particular goods: many imports enter duty-free, while a few face high rates. Tariffs are set product by product, in a schedule with thousands of lines.
The average US tariff since 1929
Customs duties collected as a share of the value of goods imported, year by year. The 1930s peak followed the Smoot–Hawley tariff; decades of trade agreements then brought the average down.
The numbers behind the chart
| Date | Average tariff rate |
|---|---|
| 1929 | 12.9% |
| 1930 | 14.6% |
| 1940 | 11.3% |
| 1950 | 5.9% |
| 1960 | 7.0% |
| 1970 | 6.1% |
| 1980 | 2.9% |
| 1990 | 3.4% |
| 2000 | 1.7% |
| 2010 | 1.5% |
| 2020 | 3.0% |
| 2021 | 3.1% |
| 2022 | 3.1% |
| 2023 | 2.6% |
| 2024 | 2.6% |
| 2025 | 8.0% |
Why it matters
Tariffs change the prices of everyday goods, from cars and washing machines to the parts inside a smartphone.
They shape which industries grow where, and they can start trade wars that hurt exporters on both sides.
They raise revenue: in 2025, US customs duties brought in $269B.
A common mistake
Myth: A tariff is paid by the foreign country.
In fact: It is paid to the importing country’s government by the company that imports the goods. Foreign sellers may cut their prices to keep customers, sharing the cost, but the bill at the border goes to the importer.
Questions people ask
Who pays tariffs?
The importer pays the tariff to the government (in the US, to Customs and Border Protection). Part of the cost may then be passed on to buyers in higher prices, or absorbed by foreign sellers through lower prices.
What is the average US tariff rate?
6.8% in Q3 2026: customs duties divided by the value of goods imported. Over 2025 as a whole it was 8.0%.
What is the difference between a tariff and a quota?
A tariff taxes imports; a quota caps their amount. Both raise prices at home, but a tariff brings the government revenue, while a quota’s extra profit goes to whoever holds the import licenses.
Read more on BigCapital
About the numbers
- The numbers on this page are recalculated from the data every night; the sources are listed at the end of the page.
- US federal government receipts: customs duties: U.S. Bureau of Economic Analysis, National Income and Product Accounts, Table 3.2, series B235RC1A027NBEA; retrieved from FRED, Federal Reserve Bank of St. Louis.
- US federal government receipts: customs duties (quarterly): U.S. Bureau of Economic Analysis, National Income and Product Accounts, Table 3.2, series B235RC1Q027SBEA; retrieved from FRED, Federal Reserve Bank of St. Louis.
- US imports of goods: U.S. Bureau of Economic Analysis, National Income and Product Accounts, Table 1.1.5, series A255RC1A027NBEA; retrieved from FRED, Federal Reserve Bank of St. Louis.
- US imports of goods (quarterly): U.S. Bureau of Economic Analysis, National Income and Product Accounts, Table 1.1.5, series A255RC1Q027SBEA; retrieved from FRED, Federal Reserve Bank of St. Louis.
- The average tariff here is customs duties divided by the value of all goods imported, as recorded in the national accounts; rates on goods that pay duty are higher.
- This page explains a term. It is not investment advice.