The short answer is everyone, but not equally. A guide in five charts.

A tariff is a tax on imported goods, charged when they cross a border. That much is simple. The harder question – and the one that comes up every time a government announces new duties – is who ends up carrying the cost. The short answer is everyone involved in the trade, but the shares vary a great deal depending on what is being sold, who is selling it and how easily buyers can go elsewhere.

This guide walks through the question in five steps, each matching one of the charts in the accompanying video, using examples from Calder’s own importers and manufacturers.

The importer writes the cheque, then the cost moves

Legally, a tariff is paid by the business that brings goods into the country. When a Calder hardware wholesaler imports a container of steel fixings, it is the wholesaler – not the foreign factory – that pays the duty to customs before the goods are released at Port Selwyn. If the rate is 10 per cent on a £50,000 shipment, that is a £5,000 bill due on arrival.

That is why politicians who claim that a tariff is “paid by foreigners” are, at the first step at least, simply wrong. The money leaves a domestic company’s bank account.

What happens next depends on bargaining. The importer can absorb the tariff and accept thinner profits, push it on to customers through higher prices, or press the overseas supplier to cut its price. In practice it is usually a mix of all three. Economists call this “pass-through”, and studies of recent trade disputes have generally found that most of the cost – often 70 to 90 per cent – ends up with domestic buyers within a year.

“The foreign exporter pays when it has no other market to sell into. The domestic shopper pays when there is no cheaper alternative on the shelf. Everything else is a negotiation in between,” said Professor Ines Margolin, who teaches international trade at the Calder Business School.

Margolin points out that the balance shifts over time. In the first months after a tariff is introduced, importers often absorb more of the cost because their contracts and price lists are fixed. As those contracts come up for renewal, more of it is passed on.

Not every product behaves the same

The third chart compares three categories imported through Port Selwyn last year. For basic goods with many suppliers, such as standard screws or plain cotton fabric, foreign sellers often cut their prices to stay competitive, so they bear more of the cost. For specialised goods – a particular machine part, a branded spirit – buyers have fewer options, and prices in the shop rise by nearly the full amount of the tariff.

  • Commodity goods with many suppliers: overseas sellers absorb the largest share.
  • Specialised or branded goods: shoppers pay most of the increase.
  • Components used by local factories: costs spread to manufacturers and then to their own customers.

The fourth chart is about people who never import anything at all. When tariffs raise the price of imported steel, local steel producers often lift their own prices too, because their competition has become more expensive. That benefits the producer but raises costs for every builder, carmaker and furniture maker that buys steel. A tariff meant to protect one industry can quietly tax several others.

Marek Dunleavy, who runs a fabrication workshop in Ardle employing twenty-two people, said his material costs rose by about 12 per cent during the last round of duties even though he bought all his steel locally. “I never saw a customs form,” he said. “I just saw the invoice go up.”

Who gains

The final chart sets out the other side of the ledger. Governments collect revenue, and domestic producers facing less foreign competition may hire more people or invest. Whether those gains outweigh the costs is the political argument at the heart of every tariff fight. Most economists conclude that the costs are usually larger and more widely spread, while the benefits are concentrated in a smaller number of firms and places – which helps explain why tariffs remain popular in some regions and unpopular in others.

So who actually pays? The importer pays first, the shopper usually pays most, the foreign supplier pays when it has to, and a surprising number of businesses that never touch an import pay without realising it. When the next set of duties is announced, the useful question to ask is not whether there will be a cost, but where it will land.