What is a tariff? Trump's reciprocal tariffs are going into effect: What it means for you
President Donald Trump is pursuing what he considers fair trade via reciprocal tariffs, many of which are going into effect next week against Canada and Mexico and an added hike on China's tariffs.
The president signed an order on Saturday to impose tariffs of 10% on all imports from China and 25% on imports from Mexico and Canada starting March 4. Energy imported from Canada, such as oil, natural gas and electricity are to be levied at 10%.
“The actions taken today by the White House split us apart instead of bringing us together,” Canadian Prime Minister Justin Trudeau said as he announced that his country would reciprocate with 25% tariffs on up to $155 billion in U.S. imports, including alcohol and fruit. Mexico's president responded by ordering retaliatory tariffs in the same vein.
In a post on his Truth Social app, Trump said the tariffs were needed to combat the continued flow of illicit drugs, particularly fentanyl, into the United States, "We cannot allow this scourge to continue to harm the USA," he wrote, adding that the tariffs would be imposed "until it stops, or is seriously limited."
Trump has further called for "fair and reciprocal" tariffs on other major trading partners that are planned to take effect April 2.
“I’ve decided, for purposes of fairness, that I will charge a reciprocal tariff, meaning whatever countries charge the United States of America,” Trump said. “In almost all cases, they’re charging us vastly more than we charge them, but those days are over.” He added that there would also be additional import taxes on cars, semiconductors and pharmaceuticals “over and above” the reciprocal tariffs.
Wondering what tariffs are? How do they work? Are tariffs good or bad? Here's the basics and what to know.
What are tariffs?
A tariff is a tax on imported goods, imposed by the government, and is usually a percentage of the product's value.
The importing company pays the tariff to the government imposing the levy. So, if an item is valued at $100 and subject to a 25% tariff, the importer would pay $25 in tariffs.
As with any other tax, it increases the price of the product that is usually then passed on to the customer.
Tariffs are a form of trade regulation that governments use to protect domestic industries, such as agriculture and renewable energy or support local industries. They are also used to negotiate trade agreements and compete with other countries or retaliate against them when needed.
Are tariffs good or bad?
Tariffs can raise money for the government and can help protect domestic industries from unfair competition.
However they can also cause tension between counties and lead to trade wars that in turn — lead to price increases for customers.
Maria Francis is a Pennsylvania-based journalist with the Mid-Atlantic Connect Team.