What are tariffs? What to know about Donald Trump's plan to tax imports
President-elect Donald Trump has long touted tariffs on the campaign trail as part of his strategy to "put America first."
In rallies and speeches, he has suggested tariffs are a way to bring manufacturing jobs back to the U.S. and negotiate harder with other countries, as China and Mexico have been targets of his tariff proposals.
But many economists caution that tariffs could harm the economy by raising costs and lowering output. Their exact impact can be hard to predict as well, as trade partners could retaliate with their own tariffs.
Here is what to know about tariffs and what Trump has suggested he will impose:
What are tariffs?
A tariff is a form of tax imposed on imports from another country. The business buying goods from another country pays the additional fee, but many experts agree the extra costs get passed onto consumers.
Economic theory generally shows higher trade barriers raise consumer prices and negatively impact economic output and income, according to the Tax Foundation, a nonpartisan tax policy nonprofit.
Tax Foundation senior policy analyst and modeling manager Garrett Watson previously told Paste BN that some argue for tariffs to get more demand for domestic manufacturers, even though they are also part of the global supply chain that could be impacted by tariffs.
National security is also an argument for using tariffs to ensure domestic production.
Tariffs under Biden administration focused on Chinese imports
The Trump campaign has argued that the Biden administration was weak on foreign trade and crippled U.S. domestic manufacturing.
Trump waged a trade war in his first term, imposing a tariff on one-tenth of the U.S. imports that were limited to products like steel, washing machines and solar panels, and goods from China.
President Joe Biden has kept many of Trump's tariffs in place, and even increased the tariffs on targeted items such as Chinese electric vehicles and solar panels.
Trump talks tariffs on the campaign trail: What has he promised?
Trump often touted promises for tariffs while campaigning for the 2024 election.
He suggested he would impose a tariff on all goods between 10-20%. He vowed to tax imports from Mexico, the U.S.'s No. 1 trading partner, by at least 25% if the country doesn't help mitigate immigration to the U.S. Also, he has suggested a 60% tariff on Chinese goods.
That would mean average tariff rates at highs not seen since the Great Depression, the Tax Foundation said.
Experts wary of tariffs' impact on consumers
More than 10 analyses show Trump's proposed tariffs would have a harmful effect on the American economy, according to the Tax Foundation.
The Tax Foundation analysis found the tariffs together add up to $79 billion, which theoretically leads to an additional $625 in taxes annually for the average U.S. household. The Tax Foundation also argues the tariffs would raise prices while reducing output and employment.
Estimates put the tariffs' possible impact on consumers in perspective:
- The National Retail Federation projected $7,600 in additional costs per U.S. household annually if Trump's tariffs are imposed.
- The Peterson Institute for International Economics a middle-income family could pay an estimated $1,700 more a year.
Contributing: Karissa Waddick, George Petras, Janet Loehrke
Kinsey Crowley is a trending news reporter at Paste BN. Reach her at kcrowley@gannett.com, and follow her on X and TikTok @kinseycrowley.