Liberation day A centuries-old tactic - so why does it matter?

What is a tariff?

- Richard Partington

Tariffs are border taxes charged on the import of goods from foreign countries. Importers pay them upon entry to the customs agency of the country or bloc that levies them.

The taxes are typically charged as a percentage of a product's value. For example, a tariff of 10% on a £100 product would carry a £10 charge at the point it is brought into the country.

As well as finished goods, tariffs are levied on components and raw materials, pushing up the costs to manufacturers significantly; particularly in a world of complex supply chains where borders may be crossed many times.

Serving as a barrier to trade, tariffs raise the price of an imported product for businesses and consumers. The US bank JP Morgan has estimated that tariffs of 25% would raise new car prices by $4,000 (£3,081).

They provide an incentive to buy a domestic tariff-free equivalent, where possible. Countries can also use non-tariff barriers to trade; including import quotas, licences and permits, regulations, safety standards and border checks.

The introduction of tariffs by one country can often collapse into a cycle of retaliation, or even a full-blown trade war. They are often used alongside other policy tools as a means of negotiation between nations.

What is Trump's strategy?

The US is the largest goods importer in the world - buying products worth $3tn in 2023. It also has the largest trade in goods deficit when imports exceed exports worth $1tn.