Sweeping tariffs are now in effect against nearly all of America’s trading partners.
Despite a pause by President Trump on reciprocal tariffs that were supposed to go into effect on Wednesday, his administration is still implementing a baseline 10% tariff on imports from dozens of countries, as well as a huge tariff on Chinese imports.
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That means companies that make products ranging from T-shirts to coffee to cars will have to pay more to get their goods into American stores.
In retaliation, the Chinese government rolled out its own tariffs on American goods coming into that country, which are expected to start on Thursday. Trump, on Wednesday afternoon, escalated the trade tit-for-tat by raising the tariff from 104% to 125%.
The European Union also approved a plan to phase in retaliatory tariffs against the U.S. on $23 billion in goods starting April 15.
Here’s what you need to know about the tariffs and what comes next.
What is a tariff?
A tariff is a tax on goods imported from another country.
Let’s say an importer spends $50 on bringing in a pair of shoes into the U.S. A 25% tariff on those shoes means the importer now has to pay the U.S. government $12.50 on top of the $50 cost of the import. With a tariff, what was a $50 pair of kicks will now cost the company $62.50.
By making imported goods more expensive, tariffs are a tactic to protect or boost domestic production. The logic: if imported goods are more expensive, the consumer will buy “home-grown” goods instead.
Do tariffs drive up prices?
Most economic experts agree they do because the tariff is essentially a tax on the importer, who in return often passes the cost of those tariffs onto the consumer.
President Trump and his administration, however, have insisted that tariffs do not significantly affect consumer prices.
The administration also believes the benefits outweigh the risks because they predict more companies that manufacture products overseas will open factories in America, bringing jobs with them.
What countries are affected by these tariffs?
On April 2, the Trump administration implemented a baseline 10% tariff on 180 countries. Those went into effect on April 5.
Some 90 countries were then hit with higher reciprocal tariffs, which were supposed to take effect Wednesday.
The European Union faced a 20% tariff. Southeast Asian nations would have been particularly impacted, with a 24% tariff on imports from Japan, a 25% tariff on imports from South Korea, and a 26% tariff on imports from India.
On Wednesday afternoon, Trump paused those reciprocal tariffs for the next 90 days, saying some 75 countries reached out to him.
The baseline tariffs remain in effect.
However, China’s reciprocal tariffs remain in place and are now up to 125% on Chinese products coming into the United States.
You can read the original tariff executive order HERE on the White House website. You can read the updated executive order on China HERE.
What products face tariffs?
Lots of products. The top products being impacted are expected to be:
- Leather goods
- Clothing and apparel
- Vehicles and parts
- Food, including coffee, chocolate, seafood, rice, cheese, wine, and produce
- Electronics and appliances
- Furniture
What products are exempt from tariffs?
Many metals are exempted from the new tariffs, including copper and minerals used in the production of electronics.
Bullion like gold is exempted, as are energy products like oil and gas.
Semiconductors are exempt.
Pharmaceuticals are also exempt. Much of America’s prescription drugs are imported.
Products that comply with the updated trade agreement between the U.S., Mexico, and Canada (the USMCA) are also exempted.
Trump has warned that he may remove the exemption on some of these products in the future, including pharmaceuticals.
The White House posted a list of exempt products HERE.
Where else will we see prices rise?
If you’re used to getting cheaply priced items from China (think Temu and Shein), this is going to hurt.
When it comes to U.S. policy on imports, you may or may not have heard of de minimis. Under Section 321 of the Tariff Act of 1930, the U.S. de minimis policy allows goods valued at $800 or less to be imported duty-free and with simplified customs procedures. It pretty much comes down to this: It’s not worth the paperwork, time, or effort to go through and put an import duty (tariff) on goods coming into the U.S. valued under $800.
The policy has greatly benefited consumers when it comes to bringing in cheap imported goods (especially from China). The phrase de minimis comes from the Latin meaning “about minimal things.”
But, Trump wants to change things. On April 2, Trump signed an executive order revoking de minimis exemptions for Chinese goods valued under $800.
Trump’s de minimis exemption against China started out harsh and then escalated to devastating: Starting May 2, the duty for postal shipment items would be 30% of the value of the item or $25, whichever was higher.
But that’s only good for a month: on June 1, it was supposed to rise to $50 per item.
On April 9, the president amended the executive order, tripling the tariffs to 90% of the value of the item or $75 (again, whichever was higher) and that after June, the minimum value would rocket to $150.
If prices go up, how soon will it happen?
This will depend entirely on how businesses respond to tariff implementation and also how the investment markets respond. Consumers could see prices rise in the next few months.
Have we imposed tariffs before?
In the 1800s, the U.S. used tariffs to kickstart domestic production of goods to stem the flow of European imports. Entrepreneurs set up their own factories, and as the decades went on, America was less reliant on foreign goods and was on a clear path to producing a lot of its own “stuff.”
The country began to back down from tariffs after it created the federal income tax with the 16th Amendment in 1913, but there were still high tariff policies in place, like the Fordney-McCumber Act of 1922. That raised tariffs on imported goods to bolster domestic manufacturing, and in turn led to retaliatory tariffs from trading partners.
In 1930, the early days of the Great Depression, President Herbert Hoover signed the Smoot-Hawley Tariff Act, which imposed new tariffs, with an average of 20% on thousands of goods. The tariffs were meant to prop up agriculture and manufacturing, but instead, they sparked retaliatory tariffs and damaged international relations.
Companies fell further behind because consumer spending was also sinking as jobs were lost.
The tariffs weren’t responsible for the Great Depression, but they did the American economy no favors.
America’s “protectionist policies” started to disappear after the 1930s, and within a decade, we were promoting free trade. According to the U.S. International Trade Commission, America entered into free trade agreements with Canada (1989), Mexico (1994), and a Memorandum of Understanding with China (2005).
During the first Trump administration, he experimented with tariffs on a limited scale.
In 2018, Trump imposed a 20% tariff on imported washing machines (which would later rise to 50%).
The idea: Drive up the cost of foreign washing machines, which will push consumers to buy cheaper domestic machines.
However, not only did the price of foreign washing machines rise (i.e., LG and Samsung), but so did the price of domestically-made washing machines (like Whirlpool and Maytag).
Since most people buy new dryers with washers, manufacturers (both foreign and domestic) used the price hike on washing machines to raise the prices on dryers as well.
Economists would later calculate the tariffs raised about $82 million for the U.S. but cost consumers $1.542 billion. Domestic companies added more jobs, but only about 1,800 of them, which researchers calculated cost about $817,000 per job.
In 2018, Trump also put a 25% tariff on steel (but it was rolled back by the Biden administration in 2021). Trump reinstated the steel tariffs on March 12.
Information from the Associated Press contributed to this report.
