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What are tariffs, why is Trump using them, and will prices rise? What are tariffs, why is Trump using them, and will prices rise?
(about 7 hours later)
President Donald Trump has said that starting on Tuesday, the US will impose 25% tariffs on Mexico and Canada and will double the tax recently put on goods from China to 20%. Donald Trump has imposed new tariffs on imports from Mexico and Canada, and has doubled the levy recently put on Chinese goods.
Trump has already announced a 25% charge on all steel and aluminium imports, and said he plans to introduce the same rate on all goods imported from the EU, arguing that the bloc was created to "screw the United States". The president sees tariffs, which are border taxes on imports, as a way to protect US manufacturing and correct trade imbalances.
Then, there are what have been called "reciprocal tariffs", where Trump plans to impose the same level of tariffs on a country that it has imposed on goods from the US, which are due to take effect on 2 April. His latest round of tariffs follows earlier ones the US levied on all steel and aluminium imports.
In his first term, Trump wielded tariffs as a foreign policy weapon, using them to punish China and push the country's North American neighbours to renegotiate a free trade agreement. Canada and China have already retaliated with tariffs of their own against US goods, sparking fears of a global trade war and higher prices.
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What are tariffs and how do they work?What are tariffs and how do they work?
Tariffs are taxes charged on goods imported from other countries.Tariffs are taxes charged on goods imported from other countries.
The companies that bring the foreign goods into the country pay the tax to the government.The companies that bring the foreign goods into the country pay the tax to the government.
Typically, tariffs are a percentage of a product's value. The 20% tariff Trump plans to impose on China means a product worth $10 would have an additional $2 charge applied to it. Typically, tariffs are a percentage of a product's value. Imposing a 20% tariff on Chinese goods means a product worth $10 would have an additional $2 charge applied to it.
Firms may choose to pass on some or all of the cost of tariffs to customers.Firms may choose to pass on some or all of the cost of tariffs to customers.
The US has typically charged lower tariffs on goods than other countries, which means his reciprocal plan could lead to a sudden and sharp increase in the tax rates - and to the prices people pay at checkout.The US has typically charged lower tariffs on goods than other countries, which means his reciprocal plan could lead to a sudden and sharp increase in the tax rates - and to the prices people pay at checkout.
Why is Trump using tariffs?Why is Trump using tariffs?
Tariffs are a central part of Trump's economic plans. He says tariffs will boost US manufacturing and protect jobs, as well as raising tax revenue and growing the economy.Tariffs are a central part of Trump's economic plans. He says tariffs will boost US manufacturing and protect jobs, as well as raising tax revenue and growing the economy.
The White House said the president was also "taking bold action to hold Mexico, Canada and China accountable to their promises of halting illegal immigration and stopping poisonous fentanyl and other drugs from flowing into our country". Goods from China, Mexico and Canada accounted for more than 40% of imports into the US in 2024.
When he first announced plans for new tariffs, the White House said the president was "taking bold action to hold [the three countries] accountable to their promises of halting illegal immigration and stopping poisonous fentanyl and other drugs from flowing into our country".
Fentanyl is linked to tens of thousands of overdose deaths in the US each year.Fentanyl is linked to tens of thousands of overdose deaths in the US each year.
The Trump administration says the chemicals come from China, while Mexican gangs supply it illegally and run fentanyl labs in Canada.The Trump administration says the chemicals come from China, while Mexican gangs supply it illegally and run fentanyl labs in Canada.
Canadian Prime Minister Justin Trudeau said his country was responsible for less than 1% of fentanyl entering the US. Canadian Prime Minister Justin Trudeau said his country was responsible for less than 1% of fentanyl entering the US, most of which comes from Mexico.
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What is happening with tariffs against China?
A 10% charge on all goods imported from China started on 4 February.
Trump later said shipments worth less than $800 (£645) would be exempt.
On 10 February, China responded with its own tariffs, including a 10-15% tax on some US agricultural goods.
Beijing has also targeted various US aviation, defence and tech firms by adding them to an "unreliable entity list" and imposing export controls.
The 10% levy doubled to 20% on 4 March.
China urged the US to return to dialogue with Beijing as soon as possible.
"If the United States... persists in waging a tariff war, a trade war, or any other kind of war, the Chinese side will fight them to the bitter end," foreign ministry spokesman Lin Jian warned.
What is happening with tariffs against Canada?
The newest tariffs enacted on 4 March are 25% against both US neighbours, Canada and Mexico.
They were originally due to begin on 4 February but delayed a month.
Canadian energy imports face a 10% tariff.
Trump said the delay would let the US see "whether or not a final economic deal with Canada" could be reached.
In retaliation on 4 March, Prime Minister Justin Trudeau said his country would immediately target C$30bn worth of products, and the remaining C$125bn over 21 days.
Any fresh duties Canada imposes will be in place for as long as the US tariffs are, he added.
Canada may also restrict US access to its energy. The country is the top oil supplier to the US and also provides some electricity to 30% of the states.
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What is happening with tariffs against Mexico?
Mexico also delayed retaliatory tariffs on US goods after the US pause.
Mexican President Claudia Sheinbaum agreed to send 10,000 members of the National Guard to the US-Mexican border to "prevent the trafficking of drugs, in particular fentanyl".
Sheinbaum said the US had in turn agreed to increase measures to prevent the trafficking of high-powered American weapons into Mexico.
Ahead of the March deadline, Mexico also said it would retaliate against the US tariffs, raising the prospect of a widening trade war.
President Sheinbaum is due to set out a detailed response shortly.
How will the steel and aluminum tariffs work?How will the steel and aluminum tariffs work?
Trump said the 25% tariff on both metals will come into effect on 12 March, with no exceptions.Trump said the 25% tariff on both metals will come into effect on 12 March, with no exceptions.
The US is the world's largest importer of steel, with Canada, Brazil and Mexico its top three suppliers.The US is the world's largest importer of steel, with Canada, Brazil and Mexico its top three suppliers.
Canada also provided more than 50% of the aluminium imported into the US in 2024.Canada also provided more than 50% of the aluminium imported into the US in 2024.
American companies that use steel and aluminium to make products have warned the tariffs could push their prices up.American companies that use steel and aluminium to make products have warned the tariffs could push their prices up.
The Canadian government said the tariffs were "totally unjustified" and vowed swift retaliation.The Canadian government said the tariffs were "totally unjustified" and vowed swift retaliation.
Trump previously announced tariffs of 25% on steel and 15% on aluminium in 2018, during his first term as president. However, he later negotiated exceptions for many countries including Australia, Canada and Mexico.Trump previously announced tariffs of 25% on steel and 15% on aluminium in 2018, during his first term as president. However, he later negotiated exceptions for many countries including Australia, Canada and Mexico.
Despite the exemptions, tariffs raised the average price of steel and aluminium in the US by 2.4% and 1.6% respectively, according to the US International Trade Commission.Despite the exemptions, tariffs raised the average price of steel and aluminium in the US by 2.4% and 1.6% respectively, according to the US International Trade Commission.
What is happening with tariffs against China?
Together, China, Mexico and Canada accounted for more than 40% of imports into the US in 2024.
A 10% charge on all goods imported from China already took effect on 4 February.
Trump later said shipments worth less than $800 (£645) would be exempt.
Beijing retaliated with its own tariffs, which took effect on 10 February.
These include a 15% tariff on US coal and liquefied natural gas products, and a 10% tariff on crude oil, agricultural machinery and large engine cars.
China has repeatedly said it does not want a trade war with the US.
What is happening with tariffs against Canada and Mexico?
The 25% tariffs on Canada and Mexico were originally due to begin on 4 February. However, this was delayed for a month.
Canada also paused its own retaliatory tariff of 25% on C$155bn of US imports.
PM Trudeau said Canada was implementing a "$1.3bn border plan" to add "new choppers, technology and personnel to the border", as well as "increased resources to stop the flow of fentanyl". Much of this security had already been announced.
Trump said the delay would allow the US to see "whether or not a final economic deal with Canada" could be reached.
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Mexico also delayed retaliatory tariffs on US goods after the US held off last month.
Mexican President Claudia Sheinbaum agreed to send 10,000 members of the National Guard to the US-Mexican border to "prevent the trafficking of drugs, in particular fentanyl".
Sheinbaum said the US had in turn agreed to increase measures to prevent the trafficking of high-powered American weapons into Mexico.
Speaking to reporters after his first cabinet meeting last month, Trump appeared to suggest that the tariffs on Mexican and Canadian goods might be postponed until 2 April.
However on 3 March, hours before the deadline he set in February, the US president said they were going forward.
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Which products will be affected and will prices increase?Which products will be affected and will prices increase?
All goods from China worth more than $800 are covered by the tariff.All goods from China worth more than $800 are covered by the tariff.
All steel imports from around the world face a 25% tax.All steel imports from around the world face a 25% tax.
Economists warn that firms selling imported goods are likely to increase prices for US consumers, to cover the cost of the duty. Mexican and Canadian goods will also be subject to a 25% levy. A 10% tariff has been added to Canadian energy exports.
If the measures against Mexican and Canadian imports go ahead, items they produce are also expected to become more expensive.
Car manufacturing could be hit extremely hard. Vehicle parts cross the US, Mexican and Canadian borders multiple times before a vehicle is completely assembled.Car manufacturing could be hit extremely hard. Vehicle parts cross the US, Mexican and Canadian borders multiple times before a vehicle is completely assembled.
The average US car price could increase by $3,000 because of the import taxes, financial analyst TD Economics suggested.The average US car price could increase by $3,000 because of the import taxes, financial analyst TD Economics suggested.
Other goods from Mexico that could be affected include fruit, vegetables, spirits and beer. Goods from Mexico that could be affected include fruit, vegetables, spirits and beer.
In addition to steel, Canadian goods such as timber, grains and potatoes are also likely to get more expensive.In addition to steel, Canadian goods such as timber, grains and potatoes are also likely to get more expensive.
Canadian energy is expected to only be given a 10% tariff instead of 25%. Still, analysts have noted this could push up prices across the board, given that oil and energy are needed to make a variety of products, such as plastic. An increase in the cost of Canadian oil and electricity could push up prices across the board.
US tariffs on imported washing machines between 2018 and 2023 increased the price of laundry equipment by 34%, according to official statistics. Prices fell once the tariffs expired.US tariffs on imported washing machines between 2018 and 2023 increased the price of laundry equipment by 34%, according to official statistics. Prices fell once the tariffs expired.
The Federal Reserve of Atlanta has estimated that the Mexico and Canada tariffs, combined with adding another 10% tariff on Chinese goods, could raise prices on everyday purchases by 0.81% to 1.63%.The Federal Reserve of Atlanta has estimated that the Mexico and Canada tariffs, combined with adding another 10% tariff on Chinese goods, could raise prices on everyday purchases by 0.81% to 1.63%.
Some experts suggest that Trump's new round of tariffs could prompt a wider trade war that could put prices up more generally.Some experts suggest that Trump's new round of tariffs could prompt a wider trade war that could put prices up more generally.
Capitol Economics said the annual rate of US inflation could increase from 2.9% to as high as 4%.Capitol Economics said the annual rate of US inflation could increase from 2.9% to as high as 4%.
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Will the UK and Europe have to pay tariffs?Will the UK and Europe have to pay tariffs?
Trump previously told the BBC the UK was "out of line", but suggested a solution could be "worked out".Trump previously told the BBC the UK was "out of line", but suggested a solution could be "worked out".
The UK exports pharmaceutical products, cars and scientific instruments to the US.The UK exports pharmaceutical products, cars and scientific instruments to the US.
Business Secretary Jonathan Reynolds said the UK should be excluded from tariffs because it buys more from the US than it sells there.Business Secretary Jonathan Reynolds said the UK should be excluded from tariffs because it buys more from the US than it sells there.
Speaking in Parliament after the announcement of the steel and aluminium tariffs, Trade Minister Douglas Alexander said the UK would not have "a knee-jerk reaction", but "a cool and clear-headed" response. Speaking in Parliament after the announcement of the steel and aluminium tariffs, Trade Minister Douglas Alexander promised a "cool and clear-headed" response.
At last month's cabinet meeting, Trump said he would announce sanctions on EU goods "very soon". During his 26 February cabinet meeting, Trump said he would announce sanctions on EU goods "very soon".
"It'll be 25% generally speaking and that will be on cars and all other things," he added."It'll be 25% generally speaking and that will be on cars and all other things," he added.
The US had a trade deficit of $213bn with the EU in 2024 - something Trump has previously described as "an atrocity".The US had a trade deficit of $213bn with the EU in 2024 - something Trump has previously described as "an atrocity".
In response, the European Commission said it would react "firmly and immediately against unjustified tariffs".In response, the European Commission said it would react "firmly and immediately against unjustified tariffs".
US companies Harley Davidson and Jack Daniel's have previously faced EU tariffs.US companies Harley Davidson and Jack Daniel's have previously faced EU tariffs.