Eu Tariffs Explained: Who Sets Them, Pays Them, And Benefits?

As the European Union considers how to respond to a fresh wave of trade protectionism from US President Donald Trump, attention is once again turning to the role of tariffs. But what exactly are tariffs, how do they operate within the EU, and who ultimately foots the bill?

Tariffs, or customs duties, are taxes levied on goods imported from abroad. They are used by nearly every country and can take different forms. The most common is the "ad valorem" duty-charged as a percentage of the products value. The EU also applies specific tariffs, which are set as a fixed amount per unit-for example, per kilogram or litre.

According to the CCI-Cepii database, the global average tariff in 2022 was 3.6 per cent, meaning imported goods typically cost 3.6 per cent more than they would domestically. However, this figure masks large variations depending on the country and product sector.

Tariffs primarily serve to protect domestic industries by making imported goods more expensive and helping local producers remain competitive. In many developing nations, they also play a significant role in raising government revenue-some African and island countries generate over 30 per cent of their public funds through such duties.

Tariffs can also be used as tools to control a country's trade balance by discouraging excessive imports. This approach aligns with the protectionist stance currently seen in US policy.