Tariffs explained: How they may impact Arizona's agricultural industries
You've probably heard of tariffs in the news about trade wars or politics, but what are they, and why should you care? In our series on tariffs, we'll explain what they are, how they work, and how they affect the lives and livelihoods of Arizonans.
What are tariffs?
In simple terms, a tariff is a sales tax placed on goods coming into a country. Think of it like a toll booth for imports - things like fruit, clothes or car parts have to pay to cross. Typically, tariffs are calculated as a percentage of a product's cost.
Countries impose tariffs for a number of reasons, including to protect local industries from competition, bring in some revenue for the government, or incentivize other countries to play nice in trade deals.
Who pays for them?
George Frisvold
The short answer is that it depends.
George Frisvold, a professor in the Department of Agricultural and Resource Economics, explains that the question of "who pays" often comes down to who blinks first.
"In theory, some of it gets passed out to the consumer and some of it is paid by the seller because they have to charge a lower price before tax," he said. "Our experience with the tariffs of the first Trump Administration is that the Chinese exporters, for example, did not lower their prices at all and that U.S. businesses and consumers ate the entire cost of the tariffs."
Tariffs may be a mixed bag for Arizona agriculture.
Frisvold estimates that more than 88% of Arizona's cotton crops are exported to other countries.
The effects of tariffs aren't just felt by consumers; they can impact entire industries.
Arizona is a major supplier of crops like lettuce, citrus and cotton, with agricultural powerhouses like Yuma pumping out billions in goods. An increase in tariffs on produce imports could make them pricier, making Arizona-grown vegetables more appealing to consumers across the country.
That all sounds great for local farmers, but it comes with a risk. If other countries reciprocate with their own tariffs - known as retaliatory tariffs - Arizona's exports could take a hit.
"Agricultural exports contribute almost $2 billion to Arizona's economy, and there are some major crops that could be impacted by retaliatory tariffs," Frisvold said. "The single largest crop that would be affected is cotton, since we export over 88% of it - and that's probably a conservative estimate."
So for Arizona's agricultural sector, tariffs could be a mixed bag. They may give farmers a boost by making imported produce less appealing. But they can also backfire and spark trade fights, which could hurt producers whose business relies on exporting their crops.