Tariffs explained: Who benefits and who pays the price? (2025)

7 April 2025

Money

Tariffs are making headlines again with Trump’s latest announcement. But what exactly are they, why do governments use them, and how do they impact everyday life?

What is a tariff?

A tariff is a tax on imported goods, making them more expensive to encourage local purchases. For example, if the U.S. imposes a 25% tariff on Canadian cars, their prices rise, making American-made cars more attractive.

Why do governments impose tariffs?

Governments use tariffs to protect local industries, generate revenue, and reduce trade imbalances. They can also be a political tool, pressuring other countries in trade negotiations. In some cases, tariffs are used for national security, ensuring domestic production of critical goods like steel or semiconductors.

How do tariffs affect everyday life?

Tariffs increase costs for consumers as businesses pass on higher import prices. They can also lead to trade wars, where countries retaliate with their own tariffs, creating economic uncertainty. Stock markets often react negatively to tariff announcements, while local industries may benefit from reduced foreign competition.

Trump’s latest tariffs: A case study

Trump recently imposed a 25% tariff on imports from Canada and Mexico (10% on Canadian energy) and an additional 10% on Chinese goods. He claims these measures target drug trafficking and border security.

The impact is already visible. Prices are expected to rise, financial markets reacted with volatility, and the U.S. dollar strengthened while the Canadian and Mexican currencies fell. Canada and Mexico have warned of retaliatory tariffs on billions of dollars in U.S. goods.

Trump tariffs so far

Target countries	Tariff rate	Goods targeted	Forecast
Major exporters	25%	Steel, aluminium	Marginal impact on US. Canada exposed
European Union	20-25%	Various goods	Risks 70% cut in EU exports to the US - hitting 1.5% of EU GDP
Major exporters	25% (pending)	Cars, chips, pharma	Awaiting details
All countries (excl. USMCA)	10% baseline (reciprocal)	All imports	Broad impact on global trade; consumer prices may rise
Switzerland	Approx. 30% (estimated)	General goods	Included in baseline tariff; indirect impact on exports
Canada, Mexico	25%, but 10% Canada energy	Most	Risks 1% hit to US GDP, severe shock in Canada and Mexico
All countries	25%	Automobiles	Higher car prices; impact on global auto sector
EU, Japan, Mexico, Canada	25%	Automobiles, auto parts	Major disruption to global carmakers; potential job losses in U.S.
China, Vietnam, Malaysia, Thailand	10-34%	Solar panels, clean energy equipment	Costlier renewables; may slow energy transition
Taiwan, South Korea, China	25% (proposed)	Semiconductors, tech components	Higher costs for electronics & AI sectors; domestic chip push likely
Vietnam	46%	Apparel, footwear	Consumer prices rise; pressure on global fashion supply chains
Various countries	10-50% (reciprocal)	Various goods	Mixed effects; country-specific trade tensions
Major exporters	Pending	Copper	Marginal impact on US. Chile and Canada most exposed
EU, UK and Canada	Pending digital tax response	Undetermined	Awaiting details
China	Increased from 10% to 34%	All imports	Significant escalation; strong impact on China exports

Are tariffs a good idea?

It depends on perspective. Tariffs protect local industries but raise prices and can disrupt economic growth. If tensions escalate, they could lead to a full-blown trade war. For now, Trump’s tariffs are shaping global trade debates, and their long-term effects remain uncertain.