Tariffs
Tariffs are trade barriers enacted through legislation that impose costs on corporations operating outside their home country. They affect corporate profit margins, market capture during sector competition, and how commodity prices are weighted in margin calculations.
What a Tariff Does
A tariff imposes a margin penalty equal to its rate on every foreign corporation sector operating in the tariff-imposing country. A 25% tariff rate means a -25 percentage point margin modifier for affected sectors.
Tariffs also have two secondary effects:
- They shift commodity margin calculations toward local (state-level) prices.
- They alter the outcome odds when corporations fight for market share.
Enacting a Tariff
Tariffs are created through the legislation system. A bill containing a tariff provision, when passed and enacted, creates or updates a tariff record for the specified scope and rate.
Scope Types
| Scope | Target | Example |
|---|---|---|
economy_wide | All foreign corporations in the country | "25% tariff on all imports" |
sector | Foreign corporations of a specific sector type | "30% tariff on foreign steel producers" |
origin_country | Corporations headquartered in a specific country | "40% tariff on German corporations" |
corporation | A single named corporation | Targeted sanction on one entity |
Tariffs use a composite key (country, scope type, target sector, target origin country, target corporation). Re-enacting the same provision at a new rate updates the existing record rather than creating a duplicate.
The Territorial Invariant
A tariff only applies to sectors operating in the country that imposed it. A US tariff on Chinese corporations does not affect Chinese sectors operating in Germany — it only affects Chinese sectors with operations inside the US. This is the critical invariant: tariff country must match sector operating country.
Effective Rate and Stacking
The effective tariff rate for a sector is the sum of all applicable tariffs. Multiple tariffs stack additively:
| Active tariffs | Effective rate |
|---|---|
| 20% economy-wide | 20% |
| 15% sector (matching) | 15% |
| 20% economy-wide + 15% sector | 35% |
| 20% economy-wide + 10% origin-country | 30% |
The effective rate is capped at 100%.
Domestic corporations pay no tariff. Only foreign-headquartered corporations operating in the tariff country are subject to the penalty.
Foreign Corporation Margin Penalty
The full effective tariff rate is subtracted from a foreign corporation sector's profit margin:
| Effective rate | Foreign margin penalty |
|---|---|
| 0% | 0pp |
| 25% | -25pp |
| 50% | -50pp |
| 100% | -100pp (effectively unprofitable) |
A heavily tariffed sector may need exceptional margins from other modifiers to remain viable.
Domestic Corporation Supply-Chain Malus
Broad tariffs create supply-chain friction that also affects domestic corporations — but the penalty is far smaller and only applies to economy-wide and sector tariffs (not origin-country or corporation-specific ones):
| Economy-wide + sector tariff total | Domestic malus |
|---|---|
| 0% | 0pp |
| 25% | -2.5pp |
| 50% | -5pp |
| 100% | -10pp |
The formula: domestic malus = -(combined rate / 100) × 10pp, capped at -10pp. This represents the cost of restricted access to cheaper foreign inputs, without punishing domestic firms as heavily as the tariff hits foreign ones.
Commodity Blend Weight Shift
Normally, commodity margin calculations are weighted 75% global / 25% local (state-level). High tariffs shift this weighting toward local prices, reflecting that tariff barriers push buyers toward domestic alternatives:
| Effective tariff rate | Local weight | Global weight |
|---|---|---|
| 0% | 25% | 75% |
| 25% | 31.25% | 68.75% |
| 50% | 37.5% | 62.5% |
| 100% | 50% | 50% |
This means in a high-tariff environment, a sector's margins become more sensitive to local supply conditions and less tied to global commodity prices.
Market Capture Effects
Tariffs affect the outcome when corporations fight for market share through sector split attacks. The effective tariff rate grants a bonus to domestic attackers and a penalty to foreign ones:
| Effective rate | Domestic attacker multiplier | Foreign attacker multiplier |
|---|---|---|
| 0% | 1.0× | 1.0× |
| 25% | 1.125× | 0.875× |
| 50% | 1.25× | 0.75× |
| 100% | 1.5× | 0.5× |
A 50% tariff rate means a domestic corporation has a 25% better chance of winning market share, while a foreign competitor has a 25% worse chance. This effect only applies during active split attacks — it does not affect normal sector operation.
Combining Tariffs and Subsidies
Tariffs and subsidies are complementary tools for industrial policy:
- Subsidies give domestic corporations a +15pp margin bonus.
- Tariffs give foreign corporations a margin penalty equal to the tariff rate.
A 25% tariff + a 15pp subsidy creates a 40pp swing in competitiveness between a domestic sector and a foreign one. At high tariff rates combined with generous subsidies, foreign corporations can be effectively priced out of a market entirely.
Viewing Active Tariffs
Active tariffs are visible in the national Congress view and in the legislation history for the enacting bill. Each tariff shows its scope type, target, and rate, along with the enacting bill.
Related Systems
- Subsidies — The counterpart to tariffs: margin bonuses for qualifying domestic (or all) corporations
- Bills & Legislation — How tariff provisions get enacted into law
- Corporations — How profit margins and market capture work for sectors
- Commodities — How commodity blend weights affect sector margins