Whether a specific tariff, in which a fixed amount of tax is levied on a product, or an ad valorem tariff
, in which the tariff is a percentage of a product's value, a tariff increases the price of a product in host country currency from (X) to [(X) + tariff rate(X)].
While ad valorem tariffs
are transparent (say, 20% of import value), specific tariffs are not.
Congress had put in place an American Selling Price (ASP) tariff system in 1909, replacing ad valorem tariffs
based on invoice prices by tariffs based on what the imported commodity would cost to produce in America.
With his decision to impose a maximum of 30% ad valorem tariffs
as opposed to the 40% requested by the steel lobby, the President split the difference between free trade and total protectionism.
BMI cautions, however, that Iran imposes ad valorem tariffs
of over 60% on imported medicines, which will significantly raise the final cost to consumers.