Tariff – it’s a word we have been using more and more recently in our stories, but what does it mean?
It’s a tool for governments to manage the competition between locally sourced products and products that are imported from other countries.
For example, if Australia still made cars, the federal government could add a tariff to cars imported from other countries.
It would make imports more expensive than locally made cars, making those local options more attractive for Australians.
US tariffs cause global economic uncertainty
If you were to Google tariffs now, the results will be stories relating US President Donald Trump’s use of them to shake up the global economy.
Since entering office for a second term, Mr Trump has slapped tariffs on most countries around the world.
Products entering the United States from India and Brazil at the moment have a tariff of 50 per cent.
This means that if you are in the United States, a bag of Brazilian coffee beans on the shelf will be 50 per cent more expensive.
Before Mr Trump returned to office in January, Australia had a free trade agreement with the US.
This meant trading between the two countries was tariff free.
However Australia is now subject to a 10 per cent tariff on Australian goods entering the US.
Australia has not responded by returning the favour. Goods entering Australia from the United States remain tariff free.
Mr Trump’s tariffs have caused problems for businesses around the world who trade with the United States, including Indigenous businesses in Australia.
When is a tariff paid?
When a business or distributer in the US orders products from Australia, it must make two payments.
First, the products themselves have to be paid for.
Second, the importer has to pay a tariff when the goods arrive in the US.
The goods will be released to them only once that tariff is paid, but the Australian supplier doesn’t have to worry about the tariff.
This is how it works for most larger businesses.
However for businesses like Kirrikin, which sells clothing with Indigenous designs directly to the customer via their website, things are a little different after recent changes to tariff rules.
When the item is being delivered straight to the customer, Kirrikin must pay the tariff before the product can enter the US.
“We have been operating for just on 10 and a half, nearly eleven years and this is the first time we’ve seen anything like this.”
