What are tariffs, how do they work and why is Trump using them?

US President Donald Trump has announced sweeping tariffs on goods imported from the rest of the world.

Trump claims that a 10% tariff on all nations and much higher rates of up to 104% on individual countries will boost the US economy and protect jobs.

However, there are warnings that the move could harm the world economy, and push up prices for consumers in the US and around the globe.

Tariffs are taxes charged on goods bought from other countries.

Typically, they are a percentage of a product’s value. For example, a 25% tariff on a $10 (£7.59) product would mean an additional $2.50 (£1.90) charge.

Companies that bring the foreign goods into the country have to pay the tax to the government.

Firms can choose to pass on some or all of the cost to customers.

For decades, Trump has argued that the US should use tariffs to boost its economy.

He says they will encourage US consumers to buy more American-made goods, increase the amount of tax raised and lead to huge levels of investment in the country.

Trump wants to reduce the gap between the value of goods the US buys from other countries and the value of those it sells to them. He argues that America has been taken advantage of by “cheaters” and “pillaged” by foreigners.

The US president has also made other demands alongside tariffs. The first announced during his current term targeted China, Mexico and Canada, after he said he wanted them to do more to stop migrants and illegal drugs reaching the US.

Trump has strongly defended his tariffs announcement but a growing number of influential voices within his Republican Party have joined opposing Democrats and foreign leaders in attacking the measures.

Long-standing Trump ally and Daily Wire co-founder Ben Shapiro said they could be economically catastrophic, and that the messaging behind them had been muddled.

Trump’s minimum 10% tariff on all imports to the US was introduced on 5 April.

The UK, Argentina, Australia, Brazil and Saudi Arabia are among the countries this applies to.

However, many nations will face much higher tariffs, from 9 April.

These tariffs include 49% on Cambodian products, 46% on Vietnamese imports and 20% on goods from the EU.

Most Chinese imports now face a 104% tariff, after China vowed to “fight to the end” and refused to back down from imposing retaliatory tariffs of 34% on the US.

White House officials described the higher tariffs – on countries Trump called the “worst offenders” – as “reciprocal”.

Reciprocal would mean they were based on what countries already charge the US in the form of existing tariffs, plus non-tariff barriers such as regulations.

However, this is not what has happened for all of the countries on the list.

Instead the tariff rate was calculated on the basis that it would eliminate the US’s goods trade deficit with each country.

Some countries, including the UK, have had tariffs applied even though they buy more from the US than they sell to it.

Many economists expect tariffs to push up prices across a range of imported goods, as firms pass on some or all of their increased costs.

The products affected could include everything from clothing to coffee and alcohol to electronics.

Some firms may also decide to import fewer foreign goods, which could make those which are available more expensive.

The price of goods manufactured in the US using imported components may also rise.

For example, car parts typically cross the US, Mexican and Canadian borders multiple times before a vehicle is completely assembled.

Car prices had already been expected to increase as a result of earlier tariffs.

The cost of a car made using parts from Mexico and Canada alone could rise by $4,000-$10,000 (£3,035 – £7,588) depending on the vehicle, according to analysts at the Anderson Economic Group.

The measures could also damage the US economy.

The chance of a recession rose to 50% after Trump’s announcement on new tariffs, according to former International Monetary Fund (IMF) chief economist Ken Rogoff.

Trump’s top officials have repeatedly played down recession fears, and insisted that the tariffs would be implemented as planned.

Trump’s tariffs announcement has caused volatility on global stock markets.

Stock markets are where firms sell shares in their business. They reflect the best guess of what every company in the world is worth and what their future profits will be.

Share prices have been hit because investors think the new tariffs will increase costs and reduce profits.

Many people are affected by stock market falls – even if they don’t invest in shares directly – because of the knock-on effect on pensions, jobs and interest rates.

The UK exported around £58bn of goods to the US in 2024, mainly cars, machinery and pharmaceuticals.

It was already due to be affected by the earlier tariffs targeting steel, aluminium and car imports.

Prime Minister Sir Keir Starmer said “clearly there will be an economic impact” from the 10% tariff. However, he said US-UK trade talks are ongoing, and that he will “fight for the best deal for Britain”.

The UK government has so far not announced any taxes on US imports. However, it is drawing up a list of US products it could hit with retaliatory tariffs.

Following the announcement of tariffs, car maker Jaguar Land Rover said it would “pause” all shipments to the US as it worked to “address the new trading terms”.

Economists have warned US tariffs could knock the UK’s economy off course and make it harder for the government to hit its borrowing rules.

EU chief Ursula von der Leyen warned that “the consequences will be dire for millions of people around the globe”.

Canada has announced a 25% tariffs on some US vehicles, with a start date to be confirmed.

Italy‘s Giorgia Meloni – a Trump ally – said the reciprocal tariffs were “wrong” but that she would work towards a deal with the US to “prevent a trade war”.

In the Republic of Ireland, Micheál Martin said there was “no justification” for “deeply regrettable” tariffs which benefitted “no-one”.

Australia‘s Anthony Albanese said “this is not the act of a friend”.

South Korea‘s acting president Han Duck-Soo said “the global trade war has become a reality”.

Japan said its 24% levy was “extremely regrettable” and could violate World Trade Organization and US-Japan agreements.