What they are and how they would work

WASHINGTON» So is this what a trade war looks like?

The Trump administration and China’s leadership have threatened to impose tariffs on $50 billion of each other’s goods. Trump has proposed imposing duties on $400 billion more if China doesn’t further open its markets to U.S. companies and reduce its trade surplus with the United States. China, in turn, says it will retaliate.

In recent years, tariffs had been losing favor as a tool of national trade policy. They were largely a relic of 19th and early 20th centuries that most experts viewed as mutually harmful to all nations involved. But President Donald Trump has restored tariffs to a prominent place in his selfdescribed America First approach.

Trump enraged U.S. allies Canada, Mexico and the European Union earlier this month by slapping tariffs on their steel and aluminum shipments to the United States. The tariffs have been in place on most other countries since March.

Trump has also asked the U.S. Commerce Department to look into imposing tariffs on imported cars, trucks and auto parts, arguing that they pose a threat to U.S. national security.

Here is a look at what tariffs are, how they work, how they’ve been used in the past and what to expect now:

Q: Are we in a trade war? A: Economists have no set definition of a trade war. But with the world’s two largest economies aggressively threatening each other with punishing tariffs, such a war appears perilously close. All told, the White House has threatened to hit $450 billion of China’s exports to the U.S. with punitive tariffs. That’s equivalent to 90 percent of the goods that China shipped to the United States last year.

It’s not uncommon for countries — even close allies — to fight over trade in specific products. The United States and Canada, for example, have squabbled for decades over softwood lumber.

But the U.S. and China are fighting over much broader issues, such as China’s requirements that American companies share advanced technology to access China’s market, and the overall trade deficit the U.S. has with China. So far, neither side has shown any sign of bending.

Q: So what are tariffs? A: Tariffs are a tax on imports. They’re typically charged as a percentage of the transaction price that a buyer pays a foreign seller. Say an American retailer buys 100 garden umbrellas from China for $5 apiece, or $500. The U.S. tariff rate for the umbrellas is 6.5 percent. The retailer would have to pay a $32.50 tariff on the shipment, raising the total price from $500 to $532.50.

In the United States, tariffs — also called duties or levies — are collected by Customs and Border Protection agents at 328 ports of entry across the country. Proceeds go to the Treasury. The tariff rates are published by the U.S. International Trade Commission in the Harmonized Tariff Schedule, which lists U.S. tariffs on everything from dried plantains (1.4 percent) to parachutes (3 percent).

Q: What are tariffs supposed to accomplish?

A: Two things: Raise government revenue and protect domestic industries from foreign competition. Before the establishment of the federal income tax in 1913, tariffs were a big money raiser for the U.S. government. From 1790 to 1860, for example, they produced 90 percent of federal revenue, according to “Clashing Over Commerce: A History of US Trade Policy” by Douglas Irwin, an economist at Dartmouth College. By contrast, last year tariffs accounted for only about 1 percent of federal revenue.

In the fiscal year that ended Sept. 30, the U.S. government collected $34.6 billion in customs duties and fees. The White House Office of Management and Budget expects tariffs to fetch $40.4 billion this year.

Those tariffs are meant to increase the price of imports or to punish foreign countries for committing unfair trade practices, like subsidizing their exporters and dumping their products at unfairly low prices. Tariffs discourage imports by making them more expensive. They also reduce competitive pressure on domestic competitors and can allow them to raise prices.

Tariffs fell out of favor as global trade expanded after World War II.