Tariffs explained: Who benefits and who pays the price?

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 

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.