Nancy Qian

ROME – The opening salvos of U.S. President Donald Trump’s trade war have sent shockwaves around the world. Over the past three weeks, his administration has broken with decades of free-trade orthodoxy, threatening to impose tariffs not only on strategic adversaries like China but also on longstanding allies like Canada and Mexico. Even Denmark – a NATO member and steadfast US ally during and after the Cold War – has found itself in Trump’s crosshairs.

Trump’s actions have made many in the United States and around the world wonder: What exactly are tariffs, and how do they affect global trade? Simply put, tariffs are taxes on imported goods. If a Chinese manufacturer wants to sell shoes in the U.S., the American government can impose a tariff. If a U.S. retailer pays $100 for a pair, then a 10 percent tariff, like the one that Trump recently imposed on goods from China, means that the retailer must pay the US government $10.

Those $100 shoes now cost $110. Who pays the extra $10? When Trump raised tariffs on Chinese imports during his first term, American importers bore most of the cost, particularly when they could not find alternative suppliers. Consequently, retail prices remained relatively stable, at least in the first year.

But the picture becomes more complicated when tariffs remain in place for an extended period. U.S. importers cannot absorb........

© The Korea Times