What are tariffs and why is Trump using them?

Media caption,

Watch: What is a tariff? The BBC's Adam Fleming explains

  • Published

US President Donald Trump has announced sweeping new tariffs on goods imported from the rest of the world.

Trump claims that a 10% tariff on all nations and much higher rates of up to 50% on individual countries will boost the US economy and protect jobs.

However, there are warnings that prices will rise for US consumers and that the move could harm the world economy.

What are tariffs and how do they work?

Tariffs are taxes charged on goods imported from other countries.

Typically, they are a percentage of a product's value. For example, a 25% tariff on a $10 (£7.59) product would mean an additional $2.50 (£1.90) charge.

Companies that bring the foreign goods into the country have to pay the tax to the government.

Firms can choose to pass on some or all of the cost to customers, or may decide to import fewer foreign goods.

Why is Trump using tariffs?

Trump says "tariff" is his favourite word and for decades he has argued that the US should use them to boost its economy.

He says tariffs will encourage US consumers to buy more American-made goods, increase the amount of tax raised and lead to huge levels of investment in the country.

Trump wants to reduce the gap between the value of goods the US buys from other countries and the value of those it sells to them. He argues that America has been taken advantage of by "cheaters" and "pillaged" by foreigners.

Trump has also made other demands alongside tariffs.

The first announced during his current presidential term targeted key US trading partners China, Mexico and Canada. He said he wanted them to do more to stop migrants and drugs reaching the US.

A car being manufactured. A yellow robotic arm is working on the car chassis, generating dozens of orange sparks.  Image source, Getty
Image caption,

Trump's tariffs are expected to significantly disrupt US car production and put up prices

What are Trump's 'reciprocal tariffs'?

Trump said a minimum 10% tariff would apply to all imports to the US from 5 April.

The UK, Argentina, Australia, Brazil and Saudi Arabia are among the countries this applies to.

However, many nations will face much higher tariffs, starting on 9 April.

These tariffs include 49% on Cambodian products, 46% on Vietnamese imports and an extra 34% on those from China (in addition to 20% tariffs previously announced). Goods from the EU will be taxed at 20%.

White House officials described the higher tariffs - on countries Trump called the "worst offenders" - as "reciprocal".

Reciprocal would mean they were based on what countries already charge the US in the form of existing tariffs, plus non-tariff barriers such as regulations.

However, this is not what has happened for all of the countries on the list.

Instead the tariff rate was calculated on the basis that it would eliminate the US's goods trade deficit with each country.

Media caption,

The 2 April tariffs are not the first which Trump has announced.

He had previously introduced a 10% tariff on Chinese goods, which was later doubled to 20%.

He also announced 25% tariffs on goods from Mexico and Canada, and a 10% tariff on Canadian energy imports, before announcing some exemptions and delays.

He has also introduced a 25% tariff on all steel and aluminium imports, and a 25% tariff on all foreign-made cars - with a 25% tariff on car parts due to come in at a later date.

Will prices go up for US consumers?

Many economists expect tariffs to push up prices across a range of imported goods, as firms pass on some or all of their increased costs.

The products affected could include everything from beer, whisky and tequila to maple syrup, fuel and avocados.

Some firms may also decide to import fewer foreign goods - or stop altogether - which could in turn make those which are available more expensive.

The price of goods manufactured in the US using imported components may also rise.

For example, car parts typically cross the US, Mexican and Canadian borders multiple times before a vehicle is completely assembled.

Graphic showing how many car industry supply chains cross North American borders. Powdered aluminium from Tennessee is turned into rods in Pennsylvania, before crossing the border so the rods can be shaped and polished in Canada, then taken to Mexico to be assembled into pistons, before crossing back into the US

Car prices had already been expected to increase as a result of earlier tariffs.

The cost of a car made using parts from Mexico and Canada alone could rise by $4,000-$10,000 (£3,035 - £7,588) depending on the vehicle, according to analysts at the Anderson Economic Group.

The measures could also hit the US economy.

The chance of a recession rose to 50% after Trump's announcement on new tariffs, according to former International Monetary Fund chief economist Ken Rogoff.

Trump previously refused to rule out the possibility of a recession as a result of his trade policies. US Commerce Secretary Howard Lutnick said tariffs were "worth it" even if they led to an economic downturn.

How will Trump's tariffs affect the UK?

UK Prime Minister Sir Keir Starmer leans forward as he talks to US President Donald Trump during a meeting at the White House in February 2025.Image source, PA Media

The UK exported around £58bn of goods to the US in 2024, external, mainly machinery, cars and pharmaceuticals.

It was already due to be affected by the earlier tariffs targeting steel, aluminium and car imports.

Prime Minister Sir Keir Starmer said "clearly there will be an economic impact" from the new 10% tariff. However, he said US-UK trade talks are ongoing, and that he will "fight for the best deal for Britain".

The UK government has so far not announced any taxes on US imports.

However, it is drawing up a list of US products it could hit with retaliatory tariffs.

How have other countries responded to Trump's tariffs?

EU chief Ursula von der Leyen warned that "the consequences will be dire for millions of people around the globe".

She said Europe was finalising its response package to the steel and aluminium tariffs which had already been announced.

China, which is facing tariffs totalling 54%, said it will place an additional 34% tariff on US goods from 10 April.

Canada's Prime Minister Mark Carney said it was "essential to act with purpose and with force".

Italy's Giorgia Meloni - a Trump ally - said the announcement was "wrong" but that she would work towards a deal with the US to "prevent a trade war".

In the Republic of Ireland, Micheál Martin said there was "no justification" for "deeply regrettable" tariffs which benefitted "no-one".

Australia's Anthony Albanese said "this is not the act of a friend".

South Korea's acting president Han Duck-Soo said "the global trade war has become a reality".

Japan said its 24% levy was "extremely regrettable" and could violate World Trade Organization and US-Japan agreements.