What is a tariff? A tariff is a tax imposed by the government of a country on imports or exports of goods. The purpose of tariffs is to protect domestic industries, raise revenue, and retaliate against unfair trade practices.
President Donald Trump has imposed a 20% tariff on Chinese imports and a 25% tariff on Mexican and Canadian imports.
So what does this mean?
Products from these countries will now cost consumers more. BBC News reports that Trump stated, “tariffs will boost US manufacturing and protect jobs, as well as raising tax revenue and growing the economy.” President Trump’s goal is to move more manufacturing to the US, but this shift will take time, and consumers can expect to see an increase in prices for the goods affected, almost immediately.
According to the Associated Press, threatening these countries with tariffs has caused backlash and a drop in stock prices on Wall Street. Odds are high that a 25% tariff on Canadian imports (10% on energy such as oil and natural gas) will cause Canada to purchase goods elsewhere, as Prime Minister Trudeau stated, “Today the United States launched a trade war against Canada…Make it make sense.” China has already announced they will retaliate with a 15% tariff on farm exports from the US. And Mexico’s president Claudia Sheinbaum has announced they will also impose counter-tariffs.
Update 3/6: “The Washington Post” reports that President Trump has granted a one-month reprieve to U.S. automakers . He acknowledged in his address to Congress that tariffs would cause “A little disturbance” to the U.S. economy.