How Tariffs Affect International Trade and Landed Cost

Tariffs affect international trade by raising the landed cost of imported goods: the duty is added to the product cost, freight and fees, which changes what buyers pay, which suppliers are competitive and where companies choose to source. For an importer, the practical question is how much a tariff adds to each unit once it lands.

A tariff is a tax a country charges on imported goods. Governments use tariffs to raise revenue, protect domestic producers and gain leverage in trade negotiations. The rate depends on the product's tariff code, its country of origin and any trade agreement or additional duty that applies.

How do tariffs affect international trade?

Prices and margins

The importer pays the duty when goods clear customs. That cost is either passed on in higher prices or absorbed as lower margin. Either way it changes the price at which a product can compete.

Sourcing decisions

When duty on goods from one origin rises, products from other origins can become cheaper on a landed basis. Companies compare suppliers on landed cost, not ex-works price.

Supply chains and inventory

Announced changes can pull imports forward before a rate takes effect, or delay orders while a rate is under review. That creates uneven demand for freight and warehousing.

Retaliation

A tariff from one country can trigger counter-tariffs on its exports, which affects exporters in sectors that were not part of the original dispute.

Types of tariffs

The rates in this table are examples, not current rates for any product. Additional duties (e.g. HTS Chapter 99) may apply; check the current HTS or a customs broker.

Country of origin and tariff impact

The same product can pay very different duty depending on where it was made. Country of origin decides:

• Whether a preferential rate applies. Free trade agreements lower or remove duty for goods that meet their rules of origin.
• Whether additional duties apply. In the US, Chapter 99 duties such as Section 301 apply to specific products from specific origins. For example, a 12.5% Section 301 duty on most products of China has applied since July 24, 2026 (HTS 9903.05.31), with listed exclusions and an exemption for goods subject to Section 232. Additional duties (e.g. HTS Chapter 99) may apply; check the current HTS or a customs broker.
• Marking and documentation. Origin must be declared and, for many goods, marked on the product.

For a dated view of the US-China layers, see the US-China tariff levels 2026 tracker.

How to calculate the landed cost of an import

1. Confirm the HS code and full tariff line

The tariff code sets the base rate. See how to classify goods using HS codes.

2. Determine the customs value

In the US, duty is generally charged on the transaction value of the goods, with specific additions and exclusions set by law. Other countries may include freight and insurance in the dutiable value.

3. Apply the base duty and every additional duty

Multiply the customs value by the base ad valorem rate, add any specific duty, then add each applicable Chapter 99 duty. Additional duties (e.g. HTS Chapter 99) may apply; check the current HTS or a customs broker.

4. Add customs fees

US formal entries pay the merchandise processing fee (MPF): 0.3464% of value, with a minimum of $34.58 and a maximum of $670.86 per entry from October 1, 2026 (Federal Register 2026-15530). Ocean shipments also pay the harbor maintenance fee.

5. Add freight, insurance, brokerage and inland delivery

These costs are part of landed cost even when they are not part of the dutiable value.

6. Divide by units

Landed cost per unit is the total from steps 3 to 5 plus the product cost, divided by the number of units.

Worked example (hypothetical)

A US importer brings in one formal entry with a customs value of $20,000. The rates are illustrations, not the rates for any real product.

In this example duty and MPF add about 30% to the value of the goods before freight and brokerage. Additional duties (e.g. HTS Chapter 99) may apply; check the current HTS or a customs broker. The full method is in how to calculate import duty.

How can businesses recalculate landed costs when tariffs change?

1. Keep the HS code, origin and value for each SKU in one place

A rate change then becomes a lookup, not a research project.

2. Recalculate on the effective date

Most tariff actions state the exact time they apply to goods entered for consumption. Use that date, not the announcement date.

3. Re-quote from current rates

Quotes built on old rates are a common source of margin loss; see stop quoting with stale tariffs.

FAQ

How do tariffs affect international trade?

They raise the landed cost of imports, which changes prices, margins, sourcing choices and trade flows, and can lead to retaliatory tariffs.

How does country of origin affect tariffs?

Origin decides whether a preferential rate under a trade agreement applies and whether additional duties apply. The same HS code can pay different duty from different origins.

Who pays a tariff?

The importer of record pays it to customs at entry. The cost may then be shared with suppliers or passed on to customers through prices.

How do I recalculate landed cost when a tariff changes?

By storing the HS code, origin and customs value per product, and recomputing duty, fees and freight from current rates on each tariff's effective date.

Check duties by HS code. Look up the code for your product, then compare the tariff for each destination. Free to start. Open HS code lookup