Tariffs are one of those buzzwords that often make headlines — especially during trade tensions between major powers like the US and China. But what are they really?
Most people assume tariffs are just a tax on another country. But in reality, it’s you, the consumer, who ends up footing the bill.
What Is a Tariff, Exactly?
A tariff is a tax imposed by a government on goods imported from another country.
Let’s say Australia places a 20% tariff on imported washing machines. That means every overseas washing machine is taxed an extra 20% before it lands on a store shelf.
But here’s the important part: the foreign manufacturer doesn’t pay the tariff — the importer does. That’s usually an Australian distributor or retailer.
And what do they do? They pass the cost on to you.
The Hidden Tax You Didn’t See Coming
That’s why tariffs are often called “invisible taxes.”
You don’t see them on your receipt at Harvey Norman or Bunnings, but they’re baked into the price. Over time, tariffs can quietly raise costs across the board — from big-ticket items like fridges and cars, to everyday goods like clothing, electronics, or even food.
Why Do Governments Use Tariffs?
There are two main reasons:
To protect local industries
If imported goods are cheaper, local businesses can’t compete. Tariffs help level the playing field by making foreign products more expensive.To make a political statement
Tariffs are often used during trade disputes. They act as a tool of retaliation if a country is accused of unfair trading practices — like dumping cheap goods or subsidising exports.
But Tariffs = Higher Prices
Here’s the problem: tariffs raise costs, and those costs ripple through the economy.
Builders pay more for materials
Retailers pay more for stock
Manufacturers face higher input costs
And you pay more at checkout
When this happens across many sectors — steel, electronics, food — it drives up inflation.
The Bigger Picture: Tariffs and Inflation
We saw this clearly when the US imposed tariffs on Chinese goods in recent years. Prices jumped in America — not in China. The intended target felt less pain than the local shoppers.
In high-inflation environments, tariffs make things worse. They force central banks to keep interest rates higher for longer, making mortgages and loans more expensive.
So while tariffs might sound like a strong policy move, they can be tough on your wallet.
Worried about how global trade tensions might hit your budget?
Our financial advice team can help you understand the risks and build a smart strategy — whether you’re a household, investor, or business owner.