What are tariffs, why is Trump using them, and will prices rise?

The US has introduced a 25% tariff on all steel and aluminium imports from around the world.

In response, Canada and the EU have announced new tariffs on US goods worth billions of dollars, stoking fears of a global trade war.

President Donald Trump has already imposed 25% tariffs on other imports from Mexico and Canada – with some exemptions – and a 20% levy on Chinese goods.

He has also threatened to introduce further tariffs on goods from more countries in April.

Tariffs are taxes charged on goods imported from other countries.

The companies that bring the foreign goods into the country pay the tax to the government.

Typically, tariffs are a percentage of a product’s value. A 20% tariff on Chinese goods means a product worth $10 (£7.76) has an additional $2 charge.

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

The US has typically charged lower tariffs on goods than other countries.

Economists fear Trump’s new taxes could lead to a sharp increase in the prices people pay for a wide range of goods in the US and around the globe.

Tariffs are a central part of Trump’s overall economic vision.

He says tariffs will boost US manufacturing and protect jobs, raising tax revenue and growing the domestic economy.

He also wants to restore America’s trade balance with its foreign partners – reducing the gap that exists between how much the US imports from and exports to individual countries.

But he has refused to rule out the prospect of a recession as a result of his trade policies, which sent US stocks sharply down in the days before the metal tariffs took effect.

US Commerce Secretary Howard Lutnick later said the tariffs were “worth it” even if they did lead to an economic downturn.

Trump’s tariffs initially targeted goods from China, Mexico and Canada.

These accounted for more than 40% of imports into the US in 2024.

But Trump has accused the three countries of not doing enough to end the flow of migrants and illegal drugs such as fentanyl into the US.

All three countries have rejected the accusations.

The 25% tariffs on all US imports of steel and aluminum began on 12 March.

The US buys more steel than any other country – with Canada, Brazil and Mexico its top three suppliers.

Canada is also the largest supplier of aluminum to the US, providing almost 60% of the amount imported.

When Trump first announced the tariff on steel and aluminium imports, he said there would be no exceptions.

On 11 March, he threatened to double the levy for Canadian metals because of that country’s decision to charge more to electricity customers in three northern US states, in response to other US tariffs.

Trump scrapped this plan just hours before it was due to take effect, after Canada agreed to suspend the extra energy charges.

Trump previously announced tariffs of 25% on steel and 10% on aluminium in 2018, during his first term as president.

However, he later negotiated exceptions for many countries including Australia, Canada and Mexico.

Despite those previous exemptions, tariffs raised the average price of steel and aluminium in the US by 2.4% and 1.6% respectively, according to the US International Trade Commission.

In the hours after the levy took effect, Canada and the EU both announced retaliatory tariffs.

Canada introduced a 25% tariff on an additional C$29.8bn ($20bn; £16bn) worth of US goods from 13 March.

This includes steel products worth C$12.6bn, sports equipment, computers and cast iron items.

The EU tariffs will target US goods worth €26bn (£22bn), and will start on 1 April and be fully in place on 13 April.

They will cover items ranging “from boats to bourbon to motorbikes”, in addition to steel and aluminium goods such as pipes, window frames and tin foil.

European Commision President Ursula von der Leyen said she “deeply regrets this measure”. Tariffs are “bad for business and worse for consumers”, she added.

The UK exports hundreds of millions of pounds worth of steel to the US every year.

Prime Minister Sir Keir Starmer told MPs that the UK will take “pragmatic approach” to the US tariffs, but confirmed it will “keep all options on the table”.

China’s foreign ministry said the country would take “all necessary measures” to safeguard its rights and interests, arguing that the tariffs breached World Trade Organization rules.

Trump has already introduced 25% tariffs on other goods from both US neighbours, Canada and Mexico.

These were originally due to start on 4 February but were delayed for a month to allow further negotiations. The 25% tariffs began on 4 March, with a 10% tariff on Canadian energy imports.

On 5 March, Trump announced a month-long tariff exemption for cars made in North America which comply with the continent’s existing free trade agreement, the US-Mexico-Canada agreement (USMCA).

That deal, which was negotiated by Trump during his first term in office, sets out rules for how much of a car must be made in each country to qualify for duty-free treatment.

The Canadian and Mexican tariffs had prompted fears of significant impacts on car manufacturing.

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

Shares in leading US carmakers rose after the announcement.

On 6 March Trump expanded the tariff exemption to include other goods shipped under the USMCA.

Items currently covered by the pact’s rules include televisions, air conditioners, avocados and beef, according to analysis by the firm Trade Partnership Worldwide.

Trump also reduced tariffs on potash – a key ingredient for fertiliser used by US farmers – from 25% to 10%.

Mexico also delayed retaliatory tariffs on US goods during the initial month-long pause.

President Claudia Sheinbaum urged Mexicans to “remain calm” over Trump, insisting that “cooler heads will prevail.”

She also agreed to deploy 10,000 troops to the US-Mexico border to help tackle smuggling.

Speaking after the tariffs came into force on 4 March, she said the US decision had “no justification”, and promised to respond with “tariff and non-tariff measures”.

However, before these were set out, Trump announced the concessions for carmakers and other goods, which she welcomed.

While Trump has been very critical of his Canadian counterpart Trudeau, he has praised Sheinbaum, calling their relationship “very good”.

A 10% charge on all goods imported from China started on 4 February.

Trump later said shipments worth less than $800 would be exempt.

On 10 February, China responded with its own tariffs, including a 10-15% tax on some US agricultural goods.

Beijing has also targeted various US aviation, defence and tech firms by adding them to an “unreliable entity list” and imposing export controls.

The 10% levy doubled to 20% on 4 March.

China urged the US to return to dialogue with Beijing as soon as possible.

“If the United States… persists in waging a tariff war, a trade war, or any other kind of war, the Chinese side will fight them to the bitter end,” foreign ministry spokesman Lin Jian warned.

All steel and aluminium imports are being taxed at 25%.

Goods from China worth more than $800 are covered by the 20% tariff.

Non-exempt imports from Mexican and Canada are subject to a 25% levy.

Canadian energy exports to the US face a 10% tariff, which could affect a broad range of businesses.

US tariffs on imported washing machines between 2018 and 2023 increased the price of laundry equipment by 34%, according to official statistics. Prices fell once the tariffs expired.

The US has not announced any targeted sanctions against the UK.

As well as steel, Britain exports pharmaceutical products, cars and scientific instruments to America.

The UK government says it is negotiating a broader economic agreement with the US to get rid of tariffs.

During his 26 February cabinet meeting, Trump said he would set out specific sanctions on EU goods “very soon”, but these have not been announced.

The US had a trade deficit of $213bn with the EU in 2024 – something Trump has previously described as “an atrocity”.