What Are Tariffs and Why Is Trump In Favor of Them?

What Are Tariffs and Why Is Trump In Favor of Them?

President Donald Trump has fulfilled his campaign vow to introduce tariffs on imports from the United States’ three leading supplier nations—Canada, China, and Mexico.

On Saturday evening, Trump enacted orders imposing a 25% tariff on imports from Mexico and Canada, although Canadian energy products will incur a lower rate of 10%. Additionally, a 10% tariff will be applied to goods imported from China. He signed an Executive Order titled “Imposing Duties to Address the Flow of Illicit Drugs Across Our Northern Border.”

In a series of updates on his social media platform, Truth Social, Trump discussed the rationale behind the tariffs. One post indicated that the tariffs were enacted to “protect” Americans from the “major threat of illegal aliens and deadly drugs” impacting citizens, particularly highlighting fentanyl.

In another post, he shared a video from his campaign trail where he had committed to implementing the tariffs he is now enforcing.

While politicians often use tariffs as strategic tools, both consumers and economists express concerns that Trump’s tariffs, introduced just weeks into his presidency, could lead to increased prices for various goods and services. Many voters have prioritized grocery prices and overall affordability in their voting decisions, raising worries that these tariffs might elevate the costs of groceries, energy, fuel, and automotive products.

As discussions intensify around tariffs and their implications, here’s a closer look at what these government-imposed taxes entail and why Trump advocates for them.

What are tariffs?

In essence, import tariffs, such as those introduced by Trump, are taxes levied on goods brought into the country from abroad. While there are also export tariffs—taxes on goods leaving a country—these are far less common.

There are various types of tariffs, among which the ones being imposed by Trump fall under “ad valorem tariffs,” meaning they are calculated as a percentage of the value of the imported products.

Who bears the cost of tariffs?

Generally, tariffs are paid by domestic importers to U.S. Customs and Border Protection. Nevertheless, economists argue that consumers often bear part of the tariff costs. Sellers may raise the prices of imported goods to cover the extra expenses incurred from tariffs.

“Typically, this results in higher costs for importing goods,” explains Felix Tintelnot, an associate professor of economics at Duke University. “However, it’s also possible that foreign exporters may adjust their prices to remain competitive.”

For instance, avocados predominantly imported from Mexico could see price hikes at grocery stores due to the new tariffs, as Tintelnot notes.

Read More: Why Trump’s Tariffs Could Drive Up Grocery Prices

What motivates Trump’s support for tariffs?

Trump has expressed that his intention in imposing tariffs is to enhance American manufacturing and address what he perceives as unfair trade practices.

“You see these empty, old, beautiful steel mills and factories that are neglected and decaying,” Trump stated during a campaign event in October 2024. “We’re going to revitalize these companies. We’ll reduce taxes for those that produce in the USA, and we’ll safeguard these businesses with robust tariffs.”

“Focusing on a bilateral trade deficit is misleading, as such deficits are quite normal,” Tintelnot points out. “It’s akin to imposing a tariff on your local gym simply because you’re spending more there than they are getting from you.”

Trump has also claimed that these tariffs are a measure to curb the influx of undocumented immigrants and illegal drugs into the U.S.

“China produces fentanyl, passes it to Mexico, and then channels it through Canada and other routes,” Trump stated during a Friday address from the Oval Office. “All three countries have not treated us fairly.”

Read More: What Donald Trump’s Win Means for the Economy

What are the possible effects of the tariffs Trump is implementing?

According to a 2024 study by the Peterson Institute for International Economics, Trump’s proposed tariff increases could result in an additional $2,600 in annual expenses for U.S. consumers, disproportionately affecting lower-income Americans. Recently, Walmart’s CEO indicated to CNBC that price increases on goods may be necessary if these tariffs take effect.

“We import vehicles from Canada and Mexico, and many grocery items come primarily from Mexico,” Tintelnot observed. “Consequently, we should anticipate rising prices.”

While Trump’s prior tariffs on steel, clothing, and wooden cabinets did lead to increased production in those sectors, Tintelnot and other economists are concerned that broad-based tariffs could significantly impact inflation for American consumers.

Tintelnot further explains that these tariffs differ from those imposed on China during Trump’s first term, some of which extended into President Joe Biden’s administration. This is because tariffs are applied to complete items; thus, if a car is manufactured in Mexico or Canada using U.S. parts, it would still be subject to tariffs upon entering the U.S.

“Most products from China are sourced from there or elsewhere in Asia. However, with Canada and Mexico, we are indirectly imposing tariffs on American-made goods,” Tintelnot explains.

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Canada’s Prime Minister Justin Trudeau shakes hands with Donald Trump during a meeting at Winfield House, London on Dec. 3, 2019.Nicholas Kamm—Getty Images

How have Canada, Mexico, and China reacted to Trump’s tariffs?

In response to Trump’s announcements, both Canada and Mexico quickly unveiled their retaliatory tariffs, which Tintelnot warns could spark a larger “trade war” and further fuel inflation.

“We don’t want to be in this situation,” Canadian Prime Minister Justin Trudeau stated in an address on Saturday, announcing retaliatory tariffs of 25% on $155 billion worth of U.S. goods.

Trudeau reiterated his stance on Sunday via X (formerly Twitter), urging consumers to choose Canadian-made products and check labels accordingly.

Mexican President Claudia Sheinbaum condemned the tariffs and announced on social media that she has directed the Secretary of Economy to implement a strategy involving “tariff and non-tariff measures to protect Mexico’s interests.”

China’s foreign ministry expressed strong disapproval of the tariffs, asserting that it would “take necessary countermeasures” and emphasized that it has been diligent in addressing counternarcotics efforts, framing the fentanyl issue as primarily a U.S. concern.

On Sunday morning, Trump appeared to respond on Truth Social, arguing that businesses producing domestically will avoid incurring the additional costs associated with the tariffs.

“The USA has significant deficits with Canada, Mexico, and China (and nearly every other country!), with a debt of $36 trillion, and we refuse to be the ‘Stupid Country’ any longer,” he remarked, claiming that this could usher in a “golden age of America,” though he acknowledged that there may be “some pain” due to the tariffs. Ultimately, he expressed that “the price we pay will be worth it.”

In another post, Trump suggested that Canada should become the United States’ “cherished 51st state” to eliminate tariffs, adding, “We pay hundreds of billions of dollars to support Canada. Why? There’s no reason. We don’t need anything they have.”