A tariff is a tax imposed by one country on the goods and services imported from another country. Governments impose tariffs to raise revenue, protect domestic industries, or exert political leverage over another country. A key point to understand is that the tariff imposed affects the exporting country indirectly as the domestic consumer might shy away from their product due to the increase in price. If the domestic consumer still chooses the imported product then the tariff has essentially raised the cost for the domestic consumer. "Earlier this month, the Biden administration announced it is considering removing some tariffs on imports from China in an effort to ease inflation. Tariffs on Chinese goods were raised drastically under the Trump administration, during a heightened trade war between the previous administration and the Chinese government. The Trump administration raised tariffs on imports of Chinese goods from a level of 3% in early 2018 to over 20% by late 2019. The current tariff rate on Chinese exports has held steady at 19.3% since the implementation of the Phase One trade agreement between the U.S. and China in January 2020, which formally ended the trade war. During the trade war of 2018-2019, tariffs were raised on a wide range of products, from clothing to furniture and solar panels. The Biden administration suggested the tariff reduction may ease some pressure off of rising prices and mitigate the loss in purchasing power experienced by households. A study conducted by the Peterson Institute found that cutting tariffs on Chinese goods could potentially reduce the U.S. Consumer Price Index, a key measure of consumer inflation, by 1.3 percentage points. The Biden administration is conducting an ongoing review of which tariffs may be lifted, and a decision may arrive over the upcoming weeks. While tariff rates on imports from China were hiked dramatically in 2018-2019, with the Chinese government hiking rates on American goods in response, U.S. tariff rates on the rest of the world remained largely unchanged at an average of 3%. From a historical perspective, U.S. tariff rates on imports from abroad have been declining since the 1940s, from a peak average rate of nearly 60% during the Great Depression, as globalization and trade ties with the rest of the world have deepened. " By Mack Wilowski, Associate Editor Investopedia #investopedia