By Antonia Carter
Recently there has been a lot of media buzz regarding Donald Trump and the tariffs he plans to impose on all goods imported to the USA. This is part of President Trump’s plan to make America great again (MAGA).
On February 1st 2025 President Donald Trump signed executive orders imposing tariffs on the majority of the imports from Canada, Mexico and China. He officially imposed a 25% tariff on all Canadian and Mexican goods, he also added an extra 10% tariff on Canadian energy, whilst all Chinese goods faced a 20% tariff. These tariffs went into action on March 4th 2025.
So the big question is what are tariffs and why is Trump imposing them?
The BBC defines a Tariff as ‘taxes charged on goods imported from other countries’. But what does that mean?
For example, if you want to sell avocados in the US, by importing them from Mexico you would agree on a price with a Mexican Farm. Let’s say that this is $1 per avocado. As the importer, I would add my profit to the imported avocado of say 10% and therefore sell the avocados to the supermarket at $1.10 per avocado.
But under Trump’s new tariff, a 25% tax will be imposed on the importer at the border. As the importer, it is your responsibility to pay this tariff to the US government which is $0.25 per avocado as the import comes from Mexico.
With the tariff in place, the cost of the avocado has risen for the importer to $1.25 per avocado. To maintain your profits the selling price to the supermarket has risen to $1.35 passing on the added costs to the consumers. This can be seen in the illustration below
**For further information in how tariffs can impact prices, including the example of avocados, please refer to this article from the Council on Foreign Relations: https://www.cfr.org/article/guac-shock-understanding-tariffs-avocados
Given that this will invariably increase the costs of goods to Americans, why is Trump doing this?
Trump justifies his reasons for adding tariffs on goods from Canada, Mexico and China as according to Trump it’s all part of his plan to grow the US economy. He believes the tariffs will:
- Encourage US manufacturing – the costs of imports will be so high people in the US will be more inclined to self-produce.
- Protect US jobs – Tariffs ensure companies in the US have steady local income.
- Raise tax revenue – the US government will gain more money because of the tariffs imposed.
Trump has also linked his justifications for tariffs to US social problems, such as stopping illegal immigration and human trafficking. Stopping illegal immigration has been one of Trump’s main concerns, as it is a common sentiment for Trump supporters that immigration is destroying American society. Also, Fentanyl has been the leading cause of drug overdose deaths in the US since 2021. Trump believes the tariffs will provide leverage to ensure that Mexico and Canada increase their security measures at the border, and incentivise China to stop the production of Fentanyl in China.
But will the tariffs have the desired effect on the US economy?
If we look closer at Trump’s reasons for the tariffs one by one:
Encourage US manufacturing
Can tariffs encourage US manufacturing? Using the example of avocados, in theory you could start an avocado farm in the US during Trump’s 4 year term. However, if you replace the example of avocado imports with car imports, it will take a lot longer to develop a car production facility than it would an avocado farm.
Protect US jobs
Will tariffs protect US jobs? In the case of avocado imports, bringing production to the US could create more jobs for American workers. However, avocado picking typically relies on low-wage labour, so it might be difficult to find enough local workers willing to take on these roles. On the other hand, for people in middle to high-income jobs, this shift could increase their job security as demand for local services rises.
Raise tax revenue
Will it raise tax revenue? Yes it will on the face of it, as the government will earn tax revenue from tariffs on everything that is imported to the US. However, the tariffs will create a trade war and increase the cost of US products abroad leading to lower export of American goods. So the difference may not be substantial as Mexico and Canada may also impose the same tariffs on US goods and hurt the US economy.
In conclusion, Trump’s tariffs can be seen in both a positive and a negative light. But what do you think? Since the tariffs were introduced, the US stock market has seen decreases and Trump has paused some tariffs. So will tariffs encourage US manufacturing? Protect US Jobs? Raise tax revenue?