Will Donald Trump’s tariffs hurt US consumers?

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.

In practical , 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.

And tariffs imposed on those imports brought in $80bn in that year, around 2% of total US tax revenues.

The question of where the final “economic” burden of tariffs falls, as opposed to the upfront bill, is more complicated.

If the US importing firm es on the cost of the tariff to the person buying the product in the US in the form of higher retail prices, it would be the US consumer that bears the economic burden.

If the US importing firm absorbs the cost of the tariff itself and doesn’t it on, then that firm is said to bear the economic burden in the form of lower profits than it would otherwise have enjoyed.