President Trump is trying to rewire the global economic order with a flurry of on-again, off-again tariffs on goods imported from Canada, Mexico, China and elsewhere that he argues will boost U.S. factories and generate revenue.
On Wednesday at 4 p.m., Mr. Trump is expected to announce what he calls sweeping “reciprocal tariffs,” which could match the levies that other countries impose on U.S. products. New tariffs on automobiles made outside the United States go into effect on Thursday, adding to previous tariffs on steel, aluminum and other imports worth billions of dollars that Mr. Trump has imposed since returning to office in January.
What are tariffs, and who pays for them?
A tariff is a government surcharge on products imported from other countries.
Understanding tariffs means understanding how manufacturing, trade and supply chains function — and how costs build along the way.
Tariffs are paid by the companies that import goods into a country. Countries like China, Mexico, Canada do not directly pay any money to the U.S. government.
The cost of the tariffs can be passed around depending on how companies and countries react.
Trade policy experts agree that American consumers will most likely bear the cost of the new U.S. tariffs, as they did in Mr. Trump’s first term. Retailers often increase prices, and manufacturers that use imported materials face higher costs. Imposing tariffs on imports can also drive up the value of the U.S. dollar, making American exports more expensive.
What are reciprocal tariffs and the “dirty 15”?
Mr. Trump has promised to impose what he is calling “reciprocal tariffs,” which could raise what the United States charges on imports to match or account for the levies that other countries impose on American goods.
The president has taken to calling this “liberation day,” arguing that it will end years of other countries “ripping us off.”
The Trump administration has been weighing different options, including a 20 percent flat tariff on all imports. But advisers have also discussed the idea of assigning different tariff levels to different countries, depending on the trade barriers they impose against American products.
It’s not yet clear which countries could be hit by the Trump reciprocal tariffs, or what rate they might pay. But in media interviews, administration officials have mentioned the “dirty 15,” a reference to a group of countries that have tariffs on American products and run large trade deficits with the United States.
How have U.S. trading partners responded?
Mr. Trump’s strategy is upending decades of free trade agreements with America’s closest allies, and it has already prompted retaliation from major trading partners, rattled markets and upended diplomatic ties.
Canada has vowed to defend its workers, businesses and economy from new tariffs and threats from President Trump. Prime Minister Mark Carney said last week it was clear that the United States was “no longer a reliable partner.”
In March, after U.S. steel and aluminum tariffs went into effect, the Canadian government said that it would impose new retaliatory tariffs on $20 billion worth of U.S. imports. Those were imposed on top of the 25 percent tariffs that the country had announced after an initial round of levies by Mr. Trump.
The European Union also announced retaliatory tariffs on the United States. But European officials, already facing a lackluster economy, delayed their effective date, in part to increase the chances of negotiating a deal with Mr. Trump. “Jobs are at stake, prices up; nobody needs that,” said Ursula von der Leyen, president of the European Commission.
China began imposing retaliatory tariffs in March on many farm products from the United States, for which China is the largest overseas market. They included 15 percent tariffs on U.S. imports of chicken, wheat, corn and cotton and 10 percent tariffs on other agricultural products.
“Trade wars and tariff wars all start with harming others and end with harming oneself; the United States should learn lessons and change its course,” said Mao Ning, a spokeswoman for the Chinese Ministry of Foreign Affairs.
Mexico made a major effort to fend off tariffs, sending more than two dozen accused cartel leaders to the United States to face criminal charges and dispatching troops to fentanyl laboratories and the U.S. border.
Britain and Australia have chosen not to retaliate. Prime Minister Keir Starmer of Britain is trying instead to sign a long-term trade deal with the United States. And Prime Minister Anthony Albanese of Australia said his country would not impose reciprocal tariffs because they would hurt domestic consumers.
What is Trump trying to accomplish?
Mr. Trump has described tariffs as an all-purpose tool. His administration has argued that:
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The threats of tariffs on Canada, Mexico and China are a cudgel to force America’s largest trading partners to crack down on the flow of drugs and migrants into the United States.
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Pending levies on steel, aluminum and copper are a way to protect domestic industries that are important to defense, while those on cars will prop up a critical base of manufacturing.
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A new system of “reciprocal” tariffs is a way to stop America from being “ripped off” by the rest of the world.
The president has also maintained that tariffs will rake in huge sums of revenue that the government can use to pay for tax cuts and spending and even to balance the federal budget. But economists point out that tariffs can actually reduce tax revenue if the economy shrinks because consumers spend less as imported goods get more expensive.
The Trump administration has given a mix of rationales for the tariffs on Canada and Mexico. Some Trump officials said they were intended to spur crackdowns on illicit drugs, specifically fentanyl.
Trade experts point out that tariffs cannot simultaneously achieve all of the goals that Mr. Trump has expressed. In fact, many of his aims contradict one another.
For instance, if Mr. Trump’s tariffs prod companies to make more of their products in the United States, American consumers will buy fewer imported goods. As a result, tariffs would generate less revenue for the government.
“All of these tariffs are internally inconsistent with each other,” said Chad Bown, a senior fellow at the Peterson Institute for International Economics, a Washington think tank. “So what is the real priority? Because you can’t have all those things happen at once.”
How could tariffs affect consumer prices?
Mr. Trump’s tariffs target countries that are major suppliers of a wide variety of goods to the United States.
For American families, the very likely result is higher prices at grocery stores, car dealerships, electronics retailers and the pump. Fresh produce, much of which is imported from Mexico, is one of the first categories where shoppers might notice an uptick in prices. It could happen within a couple of weeks for Mexican avocados, tomatoes and strawberries, among other products.
Price increases are poised to hit liquor aisles, too, especially beer and tequila. In 2023, nearly three-quarters of U.S. agricultural imports from Mexico consisted of vegetables, fruit, beverages and distilled spirits, according to the U.S. Department of Agriculture.
It could take longer for prices to rise for durable goods, like cars, because of existing inventory, or if companies expect the tariffs to be temporary.
The Yale Budget Lab estimated that Mr. Trump’s new auto tariffs, which are scheduled to take effect on Thursday, would raise vehicle prices 13.5 percent on average, the equivalent of an additional $6,400 for the price of a standard new 2024 car. American households would pay $500 to $600 more as a result of the tariffs, the group estimated.
Mr. Trump has argued the price increases will be minimal compared with other economic benefits. The president has repeated the sentiment. Over the weekend, the NBC News correspondent Kristen Welker asked the president whether he was concerned that tariffs could make cars more expensive, to which Mr. Trump replied that he “couldn’t care less.”
“If the prices on foreign cars go up, they’re going to buy American cars,” he said of consumers.
But the economic strain has begun to show, even before the full effect begins to appear in official data, and consumer anxiety is on the rise.
What does it mean to be American-made?
Nearly half of all vehicles sold in the United States are imported, as well as nearly 60 percent of the parts used in vehicles assembled in the United States.
That’s because over the past three decades, since the North American free trade zone was created in 1994, American and foreign-owned automakers have built supply chains that cross the borders of the United States, Canada and Mexico.
For example, the 2024 Chevrolet Blazer, a popular sport utility vehicle made by General Motors, is assembled at a plant in Mexico using engines and transmissions that are produced in the United States.
Nissan makes its Altima sedan in Tennessee and Mississippi; the turbocharged version of the car has a two-liter engine that comes from Japan, and a transmission made in a factory in Canada.
The tariffs, set to go into effect on Thursday, apply both to finished cars and trucks that are shipped into the United States, and to imported parts that are assembled into cars at American auto plants.
The threat of tariffs has automakers fretting. “Let’s be real honest,” Ford Motor’s chief executive, Jim Farley, said at an investor conference in February. “Long term, a 25 percent tariff across the Mexico and Canada borders would blow a hole in the U.S. industry that we’ve never seen.”
Reporting was contributed by Andrew Duehren, Colby Smith, Ian Austen, Vjosa Isai, Annie Correal, Keith Bradsher and Alan Rappeport.
Ana Swanson covers trade and international economics for The Times and is based in Washington. She has been a journalist for more than a decade. More about Ana Swanson
Danielle Kaye is a business reporter and a 2024 David Carr Fellow, a program for journalists early in their careers. More about Danielle Kaye
Lazaro Gamio is a Times graphics editor using data visualization, maps and diagrams to report the news. More about Lazaro Gamio
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