Reflection No. 35

Hey, everyone. Tariffs have been making headlines lately and are one reason the markets have been on a roller coaster since April.

So, without diving into any policy debates, this week’s Reflection offers a quick look at how tariffs work.

Three Quick Hits:

• Article: Focus

  Relax. Focus. Attack. That’s what I used to tell myself before basketball games back in the day (or something close to it). Of the three, the most important is probably focus. According to Warren Buffett and Bill Gates, focus is the one word they credit most for accumulating their massive wealth. They endured through the hard times, the boring times, and the easy times. Sure, we may never make the Forbes Richest People list, but that’s not the point. What matters is staying focused on our own goals rather than getting distracted by what others are doing. 

• Tip: Focus on what you can control, what makes you happy, and where you stand relative to your financial goals. The rest is just noise.

• Quote: “Decide. Commit. Act. Succeed. Repeat.” - Tim Grover

Two Questions:

• Are your daily habits aligned with the version of success you want 10 years from now?

• What are you starting too late—or not at all—because you’re waiting for the perfect time?

REFLECTION No. 35: TARIFFS

I - Issue: How do tariffs work, and how do they affect imported goods and pricing?

R - Rule: Tariffs are taxes imposed by a country on imported goods. Customs authorities typically collect the tariff payment at the border before the goods are released into the domestic market. The importer is responsible for paying the tariff based on the declared value of the goods.

A - Analysis: When a shipment of goods arrives at a U.S. port of entry, the importer (or their customs broker) must file entry documents with U.S. Customs and Border Protection (CBP). These documents include details about the product, such as its classification under the Harmonized Tariff Schedule, country of origin, and declared value. CBP uses this information to calculate the tariff owed.

If, for example, the declared value of a shipment of shoes is $100,000 and the tariff rate for that category of shoes is 10%, the importer must pay $10,000 in tariffs to CBP before the goods are cleared and released. This payment is made either upfront or through a customs bond.

Once the tariff is paid, the goods are allowed into the country for sale or distribution. The importer then typically incorporates the tariff cost into the final retail price, which means consumers ultimately bear the cost of the tariffs. 

C - Conclusion: While importers handle the tariff payment, the cost often trickles down to consumers, which makes tariffs both a tax mechanism and a trade policy tool.

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