President Donald Trump has repeatedly threatened to dramatically expand tariffs. It’s a move that could affect trillions of dollars in trade and reshape prices for everything from cars to medication — while potentially straining relationships with key U.S. trading partners.
Imported goods are a key driver of the American economy, totaling $2.9 trillion in 2024, according to the U.S. Census Bureau — with China, Canada and Mexico accounting for over 40% of that volume.
It’s these top trading partners that Trump has frequently criticized, threatening a 10% tariff on goods from China and 25% tariffs on goods from Mexico and Canada.
The U.S. has a trade deficit, meaning it imports more goods than it exports. Tariffs could help close that gap by raising the prices of foreign goods and encouraging Americans to purchase domestic alternatives. In some cases, even the threat of tariffs might accomplish some of that by incentivizing manufacturers to move operations elsewhere. However, those operations won’t necessarily be relocated to the United States.
China was long the biggest exporter of goods to America. But its export total began to fall after Trump levied tariffs on the country during his first term, when companies began moving manufacturing from China to Mexico. As a result, Mexico surpassed it for total exports in 2023.
Tariffs often lead to higher costs for consumers, as affected companies pass their new costs along. One economic study concluded that the costs of Trump’s 2018 trade war were “passed on entirely to U.S. importers and consumers.” A 2019 report from the Federal Reserve concluded the 2018 tariffs led to U.S. job losses and higher consumer prices.
Among all categories of goods, the most-imported in the U.S. are machinery-related products, electronics and automotive products. Canada, China and Mexico account for a meaningful share of these imports, which means consumers could soon see prices ratcheted up on everything from new cars to smartphones to bicycles.
While tariffs will increase the price of consumer goods, Trump has hinted at reducing or eliminating the personal income tax with the new tariff revenue.
If that’s the case, it could ease consumer pain in the face of sky-high mortgages and rising prices on essentials including eggs and milk. However, income taxes make up most of the trillions in revenue the government collected last year.
On the other hand, customs duties, aka tariffs — while still a significant sum — represent a slight fraction of federal revenue.
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