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So what are those tariffs and how do they actually hurt the economy?

The first thing you have to know is that they're essentially a tax on imported goods. Whoa, sounds jargony and esoteric. Stay here. I got you. Let me explain a bit more and then we're going to relate this to going home to see your parents. Trust me. By the end of this video you'll be there when the U.S. imports steel manufactured in China and the White House has enacted 10% tariffs on that steel. The steel buyer, like General Motors or Ford, must pay a 10% tax to the U.S. government on the cost of the steel. Okay, imagine you're going to your parents house and you feel like keeping your shoes on when you move closer to the living room. Then your parents say, hey, you can keep your shoes on. But that just means you have to pick up the tab for dinner. They've now taxed you for bringing shoes into the house, making it more costly for you to do so.

It's the same thing with tariff imports. When that steel coming in from China to the U.S. gets taxed, companies like automakers that need to buy the steel to make stuff have higher costs. Now American steel makers can enjoy higher prices because the market price is artificially higher. The Chinese steel makers may actually lower prices, but that's a whole other story. Let's say the steel price in the U.S. is now higher. What's GM going to do? It could suffer lower gross margins, lower profits, that's all. It can keep car prices the same and not lose sales volumes or GM could raise its prices and protect its gross margin. Of course, this means it'll sell fewer cars. Still, GM is likely to see a hit to earnings. Now GM will lay off workers because it doesn't need as many. Then fewer people will have jobs and demand for goods and services will fall. Corporate revenues and earnings likely fall. Stocks fall. Ladies and gentlemen, this is the situation the U.S. finds itself in. Stocks have had a nice year though, but next time you hear the phrase additional tariffs, you'll be more able to adjust your portfolio. Do me a favor, by the way, say thank you to your parents.

So what are those tariffs and how do they actually hurt the economy?

Well, the first thing you have to know is that they're essentially a tax on imported goods.

This may sound jargony and esoteric, but by the end of the video above, you'll be where you need to be. 

Let's explain a bit more before we relate this to walking in to your parents home. We've piqued your interest, haven't we? 

When the U.S. imports steel manufactured in China, and the White House has enacted 10% tariffs on that steel, the steel buyer, like General Motors ( GM - Get Report) or Ford ( F - Get Report) , must pay a 10% tax to the U.S. government on the cost of the steel.
 
Imagine you're going to your parents house and you feel like keeping your shoes on when you move closer to the living room. Then, your parents say 'hey, you can keep your shoes on, but that just means you have to pick up the tab for dinner.'
 
To fully see how this relates, watch the video above. 

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