How do tariffs work? #USTariffs #TrendingTopic

In practical terms, a tariff is a domestic tax levied on goods as they enter the country, proportional to the value of the import.

So a car imported to the US with a value of $50,000 (£38,000) subject to a 25% tariff, would face a $12,500 charge.

The charge is physically paid by the domestic company that imports the goods, not the foreign company that exports them.

So, in that sense, it is a straightforward tax paid by domestic US firms to the US government.

Over the course of 2023, the US imported around $3.1tn of goods, equivalent to around 11% of US GDP.

Donald Trump has imposed new tariffs on goods entering the US from Canada, Mexico and China.

The US president signed an executive order putting a 25% tariff - or tax on imports - on all goods coming from Canada and Mexico, to get both countries to crack down on illegal immigration and drug trafficking.

Goods coming from China will also be hit with a 10% tariff "above any additional tariffs" until it cuts fentanyl smuggling. He has already pledged to target the country with a 60% rate, and has mulled a 200% tax on some car imports.

Tariffs are a central part of Trump's economic vision - he sees them as a way of growing the US economy, protecting jobs and raising tax revenue.

During his election campaign, he told voters that the taxes were "not going to be a cost to you, it’s a cost to another country".

That was almost universally regarded by economists as misleading.