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Reciprocal tariff -

On February 13, Trump signed a directive instructing his team to design custom tariffs for specific countries. This strategy is expected to impact trade dynamics with the EU, India, Brazil, Canada, Japan, Vietnam, and Thailand, which have higher tariffs and rely on the US as a key export destination. The White House highlighted issues like the 10% tariff on American vehicles entering Europe, in contrast to the 2.5% duty on imported cars in the US. They also pointed out that Brazil applies an 18% tariff on ethanol, whereas the US imposes a 2.5% rate on the same product. Other countries are likely to bear the brunt of increased tariffs when the policy comes into effect.

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Tariffs on imports -

On February 1, President Donald Trump signed orders that imposed a 25% tariff on imports coming from Mexico and Canada as well as a 10% tariff on goods from China.

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The executive order -

This executive order is titled 'Imposing Duties to Address the Flow of Illicit Drugs Across Our Northern Border.'

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Skepticism -

Many voters in the US say that grocery prices and general affordability were issues high on their list of priorities when voting. However, with the tariffs that their elected leader is making, prices of things like groceries, gas, energy, and more could rise.

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What is a tariff? -

In short, tariffs are taxes that are placed on goods that are imported from other countries.

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Export tariffs -

When you hear the word tariff, you might also think of export tariffs. These are different though and are taxes on goods that are sent out of a country.

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Ad valorem tariff -

The type of tariff that President Trump is imposing is called an "ad valorem tariff." In simple terms, this means that the tax on imported goods is calculated by taking a percentage of the product's value.

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Who pays? -

In most circumstances, tariffs are paid by domestic importers to the US Customs and Border Protection agency.

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Who really pays? -

According to economists though, there's another layer to consider and that is "who really pays?" The answer? Consumers. Often sellers of these goods will hike the prices to cover costs, leaving consumers' pockets feeling much lighter.

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A real-life example -

One example is avocados from Mexico. With President Trump's new tariffs, it could make importing avocados more expensive. Grocery stores might, in turn, raise the price of avocados to make up for the increase in taxes.

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Why exactly is Trump in favor of these tariffs? -

President Trump planned to impose tariffs on imported goods so that he could boost manufacturing in America and ultimately end "unfair trade practices."

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The claim -

President Trump claims that he is "going to bring companies back" and that taxes will be lowered for companies making their products in the USA. He is confident that tariffs will protect those companies.

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Other intentions -

It was also stated that these tariffs are there to stop undocumented immigrants and illegal drugs from coming into the US.

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Potential tariff impacts -

Based on a 2024 Peterson Institute for International Economics study, the larger tariffs could increase costs annually for US consumers by US$2,600.

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Who will be the most impacted? -

These tariffs could negatively impact lower-income Americans the most.

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Tariffs from the first term -

In his first term as president, Donald Trump enacted tariffs on steel, clothing, and wooden cabinets, which led American producers to increase their production. 

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Economists weigh in -

Despite this improvement, some economists today worry that across-the-board tariffs could largely impact inflation in America. 

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Additional thoughts -

Associate professor of economics at Duke University, Felix Tintelnot, says that the tariffs now are different than those imposed on China during President Trump's first term and that extended into President Joe Biden's presidency.

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Why are they different? -

The difference is that tariffs are placed on whole items, not just parts. So, if a car was made in Mexico or Canada but with US parts, it would still incur a tariff when it entered the US.

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How have Canada, Mexico, and China responded? -

Canada and Mexico have debuted retaliatory tariffs after the orders were signed by President Trump. It's speculated that this could trigger a wider trade war and increase inflation.

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Retaliation -

Canadian Prime Minister Justin Trudeau said in an address, "We don't want to be here." He also laid out a 25% retaliatory tariff on $155 billion of US goods.

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Choosing Canada -

Prime Minister Justin Trudeau posted on X that it's time to choose Canadian products. He advised people to check the labels and to do their parts.

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Mexico -

President Claudia Sheinbaum said on social media that she will instruct the Secretary of Economy to impose a plan including measures that will defend Mexico's interests.

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Delayed implementation - On February 3, after talking with leaders from Mexico and Canada, President Trump agreed to delay the 25% tariffs by one month. The postponement of the date, originally set for February 4, came after commitments from both nations to enhance border security and tackle drug trafficking. The new tariff deadline was moved to March 4, 2025.

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China -

China released a statement saying that it "firmly deplores and opposes this move" and that it will take any countermeasure deemed necessary.

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Imports from China -

The US currently imports a lot from China so a 10% tariff could impact over $450 billion worth of imports.

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Household burden -

The Tax Foundation estimates that tariffs on China could add $172 to the tax burden per household in the US.

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The "golden age of America" -

President Trump has said that this will be the "golden age of America." He also mentioned that some pain might be felt from the tariffs but that in the end, it'll be worth it.

Sources: (Time) (BBC) (NPR)

See also: From Eisenhower to Trump: the inflation rate under each US president

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