What are tariffs and how they work and impact US businesses in 2026

You do not need to be an economist to feel the impact of tariffs. If you have ever opened a customs invoice and found a duty charge that was double what you budgeted for, or watched your landed cost jump overnight because a new Section 232 order went into effect, you already understand what tariffs do to a business. The definition is simple. The operational reality is not.

Since early 2025, the US tariff environment has gone through more changes than most founders can track. Rates spiked to levels not seen since the 1930s, a Supreme Court ruling invalidated an entire category of tariffs, and the administration replaced them with a new legal mechanism within days. For anyone running cross-border operations, that volatility is not background noise. It is a variable in your P&L.

In this blog, we break down what are tariffs, how they actually work when your goods hit the port, what the current rates look like in 2026, and where the real risks and opportunities sit for US businesses that import or export.

What are tariffs

The tariff meaning at its simplest: a tax on imported goods. When a product enters the US, the importing business pays a percentage of that product's declared value to the federal government. That part has not changed in over 200 years.

What has changed is how many tariffs can apply to a single shipment at the same time. This is the part that catches founders off guard, and it is the reason why the question "what are tariffs" does not have a simple one-line answer anymore.

There are 3 types you will see on a customs entry:

1. Ad valorem tariffs: A percentage of the product's declared value. Most US tariffs work this way, that if you import USD $100,000 of electronics at a 10% rate, you owe USD $10,000 in duties. The key detail here is that your duty scales with your shipment size, so larger orders mean proportionally larger cash outflows at the border
   
2. Specific tariffs: A flat dollar amount per unit, regardless of value. You might see USD $2 per kilogram on a certain chemical input. These are less common but can hit hard on high-volume, low-margin products where every dollar per unit matters
   
3. Tariff-rate quotas: A lower rate up to a set import volume, then a significantly higher rate once that threshold is crossed. Sugar imports into the US have worked this way for decades. If your product falls under a quota, timing your shipments becomes a strategic decision, not just a logistics one. Tariffs are part of landed cost, alongside freight, insurance, customs brokerage, and other import charges.
   

How do tariffs work when your goods actually arrive

• Where tariffs are collected: US Customs and Border Protection (CBP) collects tariffs at over 300 ports of entry. Your customs broker classifies each product using its Harmonized Tariff Schedule (HTS) code and files an entry with CBP. The rate depends on what the product is and where it was made. You pay the duty before CBP releases the goods
  
• Classification is where most mistakes happen: Your HTS code determines your base rate, and a small difference in classification can mean a 15 to 20 percentage point swing in what you owe. "Finished steel article" and "steel derivative" are not the same rate. If your broker gets this wrong, you either overpay and file for a refund or underpay and face a penalty audit. Invest in a broker who specializes in your product category
  
• The importer pays, not the exporting country: When a headline says "tariffs on China," it sounds like China is paying. It is not. The US business importing the goods pays the full duty to CBP. Whether you absorb that cost, pass it to customers, or renegotiate with your supplier is entirely your call
  
• The de minimis exemption is gone: Since August 2025, the de minimis exemption has been suspended. Previously, shipments under USD $800 entered duty-free, and this is no longer the case. If your business relies on frequent small shipments from Chinese suppliers, this change alone may have restructured your cost model
  

What do current US tariff rates look like in 2026

The rates below reflect the tariff as of mid-2026. These numbers change frequently, so do not take them as a permanent reference.

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Pros and cons of tariffs: what actually matters for your business

Where tariffs work in your favor:

• Domestic sourcing gets a price advantage: If you make your product in the US or source locally, tariffs are doing you a favor. Your import competitors are paying 10 to 50% more at the border, which means you can compete on price without reducing your own margins.
  
• You get time to scale before foreign competitors undercut you: This one matters if you are at an early stage. Say you are launching a domestic electronics assembly line. Without tariffs, a factory in Shenzhen with 10 years of cost optimization would price you out immediately. Tariffs give you a window to find suppliers, tighten your production costs, and build a customer base before you have to compete on pure price
  
• It pushes you to diversify, which pays off long term: A lot of founders who scrambled to move production out of China in 2025 are actually better positioned now. For example, a DTC brand that shifted 40% of its sourcing to Mexico avoided the worst of the 24% effective rate on Chinese goods, and now has two supply lines instead of one. That kind of diversification protects you from the next policy surprise, not just the current one
  

Where tariffs create real pain:

• You pay duties before you make a single sale: If you are importing USD $5 million in goods at a 20% effective rate, that is USD $1 million in duties at the port. That cash is gone weeks before those products reach a customer. For a founder running lean on working capital, the problem is not the tariff rate. It is the timing
  
• Your customers are already stretched: Even if your products are not directly tariffed, the people buying from you are spending more on groceries, fuel, and electronics. A DTC skincare brand might owe zero in duties, but if its customers are paying more for everything else, there is less budget left for a USD $45 serum
  
• Trading partners hit back: When the US raises tariffs, other countries return the favor. If you are a US food brand selling into the EU or Canada, retaliatory counter-tariffs can price your products off shelves abroad. You end up paying more to import your inputs and earning less on your exports at the same time
  

Why tariffs are a cash flow problem, not just a cost problem

Most tariff coverage treats this as a pricing issue. Costs go up, so prices go up. But if you stop at the question of what are tariffs and only think about rates, you miss the bigger operational issue. For founders managing international operations, the deeper challenge is cash flow timing.

Tariff duties are paid upfront, at the port, before you take possession of your goods. If you are importing a large shipment and the effective rate just increased by 10 percentage points, that is a high unplanned cash outflow that takes weeks or months before you invoice your customer. For businesses operating on thin margins or in the middle of a growth sprint, that timing mismatch can force difficult decisions: delay a shipment, draw down reserves, or take on short-term debt to cover the gap.

This is where your financial infrastructure matters. If you are managing vendor payments across multiple currencies and countries, you need to see exactly where your cash is at any given moment, especially when a tariff shift changes your outflow by 5 or 6 figures. Aspire's¹ multi-currency* business account is built for this kind of cross-border complexity. You can manage payments in 98+ currencies across 130+ countries, set budget controls by category, and track every transaction in real time so that a tariff change does not become a cash crisis.

Frequently asked questions

1. How are tariffs collected at US ports?
   

CBP collects duties at over 300 ports of entry, where your customs broker files an entry based on your product's HTS code and country of origin, and you pay the assessed duty before the goods are released, typically within 10 working days of the entry date.

1. Who actually pays tariffs, and can I negotiate the rate?
   

The US importing business pays the full duty to CBP, and while you cannot negotiate the rate itself, you can lower your effective rate by sourcing from countries with trade agreements like USMCA, ensuring correct HTS classification, or qualifying for product-specific exemptions.

1. If the Section 122 surcharge expires in July 2026, what happens to my costs?
   

Imports not covered by Section 232 or Section 301 would revert to their base MFN rate, but the administration could extend, replace, or raise the surcharge, so build your forecasts with at least 2 scenarios.

1. What is tariff stacking, and why does it matter?
   

Tariff stacking is when multiple programs like Section 301, Section 232, and the base MFN duty all apply to the same shipment at once, which is how a single import of Chinese steel parts can reach an effective rate of 78% even though no individual tariff is that high.

1. Are the IEEPA tariff refunds actually happening?
   

Yes, CBP opened the CAPE refund portal after the Supreme Court's February 2026 ruling, covering an estimated USD $166 billion in duties paid by over 330,000 businesses between April 2025 and February 2026, so check your customs records and file if you imported during that period.