What are tariffs, how do they work and why is Trump using them?

US President Donald Trump has imposed tariffs on goods arriving here from countries around the world.

Trump argues the move will boost American manufacturing and create jobs, but critics warn of higher prices and damage to the global economy.

But he has also used the taxes to make other demands and has threatened tariffs on eight countries, including Britain, over opposition to his proposed annexation of Greenland.

The US Supreme Court is due to rule soon on whether some tariffs are illegal.

Tariffs are taxes imposed on imported goods.

Typically, the fee is a percentage of an item’s value.

For example, a 10% tariff on a $10 product would mean a $1 tax on top – bringing the total cost to $11 (£8.17).

Companies that import foreign products pay taxes to the government.

These companies may pass on some or all of the extra costs to their customers, which means regular Americans and other American businesses.

They may also decide to import fewer goods.

Trump says the tariffs increase the amount of taxes the government raises, encourage consumers to buy more American-made goods and promote investment in the US.

He wants to reduce America’s trade deficit – the difference between the value of goods it buys from other countries and the value of goods it sells to them.

The president asserts that “fraudsters” and foreigners have exploited America.

Trump has also utilised taxes to impose additional demands.

For example, when he announced tariffs against China, Mexico, and Canada, he said countries should do more to stop immigrants and illegal drugs. Fentanyl is reaching America.

Trump has now threatened to impose new tariffs beginning in February on eight countries that oppose his proposed annexation of Greenland.

Several tariffs have been amended or delayed following the announcement.

Trump’s tariffs have faced several legal challenges because of the way they were introduced.

Instead of obtaining congressional approval for tariffs, the Trump administration used the 1977 International Emergency Economic Powers Act. Declaring an emergency under the law means Trump can issue immediate orders and bypass established procedure.

In August 2025, a US appeals court ruled that most of Trump’s tariffs were illegal but left them in place.

The White House asked the U.S. Supreme Court to overturn that decision, and it began hearing arguments in the case in November 2025.

A decision is expected in the coming weeks.

On January 12, Trump posted on social media that it would be “totally messed up” if the Supreme Court struck down his tariffs and warned of difficulties if businesses were told they could claim refunds.

Trump said, “It’ll take years to figure out the numbers and who gets paid, when and where.”

If the Supreme Court does not uphold his tariffs, the President warned that we will face ruin.

Talks are ongoing with several countries, including America’s top three trading partners.

China, Canada and Mexico were warned they would face particularly high tariffs:

• Mexico faces a 30% tariff on its goods, as well as sector-specific levies and a 25% fentanyl tariff. However, like Canada, most of its goods are exempt under the USMCA. The tariffs were put on hold until the end of October to allow time to strike a deal. On October 27, Mexican President Claudia Sheinbaum announced that she and Trump had agreed to extend the deadline by “a few more weeks.” speaking terms

A patchwork of different rates applies for other countries.

Many of these stem from Trump’s announcement in April 2025 that a “baseline” of 10% would apply to imports from all countries. The nations agreed that the “worst offenders” would face higher rates in retaliation for unfair trade policies.

After delays to allow trade talks, new tariff rates for dozens of countries were introduced in August.

These include:

On January 13, Trump announced that the US will impose 25% tariffs on countries that continue to trade with Iran, following Tehran’s crackdown on anti-government protests, which has resulted in thousands of people feared dead.

The US President announced on January 17 that he would impose 10% tariffs on eight countries opposing their proposed annexation of Greenland.

Additional tariffs on goods from Denmark, Norway, Sweden, France, Germany, the UK, the Netherlands and Finland will come into effect on February 1 but could later rise to 25%—and remain in place until a deal is reached.

In June 2025, the UK negotiated a 10% US tariff rate, the lowest ever of any country that has made a deal with Trump.

It exported goods worth approximately £58 billion to America in 2024 – mainly cars, machinery and pharmaceuticals.

The 10% rate applies to the first 100,000 UK vehicles exported each year – approximately the number of cars sold in 2024. Additional vehicles face the standard 25% tariff.

The agreement also allows both countries to sell beef to each other. Some US ethanol would face 0% tariffs instead of 19%.

Trump announced in June that “the deal is done” but did not confirm his expectation that all tariffs on steel imports from Britain would be removed.

The UK is the only country that does not face 50% tariffs on steel and aluminium. Instead, the UK pays a tariff of 25%.

The BBC understands UK plans to scrap tariffs on steel exports are altogether now banned.

However, speaking to reporters ahead of his second state visit to Britain in September, Trump said he was “helping” Britain improve the deal.

Trump’s announced taxes target specific products, irrespective of their manufacturing location.

These include:

Additionally, Trump ended rebates on imports valued at $800 (£592) or less.

This means low-cost goods are no longer duty-free – a move that will affect millions of packages sent every day, including those from online retailers like Shein and Temu.

Companies sending parcels will now have to pay a fee based on the tariff rate that applies to the country from which the item was sent. Otherwise, for six months, they can choose to pay a fixed fee between $80 and $200 per package.

The White House confirmed on January 2 it had cut proposed tariffs on some imported pasta by about 92%.

The government alleged that some Italian-made goods were being sold in the US at “below the normal price,” undercutting local producers, but it reduced tariffs after constructive engagement with the companies concerned.

In November, Trump signs an executive order exempting several other food products from tariffs, which include avocados, bananas, beef, and coffee. The administration said it took this action because the specified goods could not be produced domestically in sufficient quantities.

Shoppers have seen prices rise on some products, including toys, appliances and furniture, as well as some food items.

American inflation was 3% in 12 months until September, increasing from April, when it was 2.4%.

It fell to 2.7% in November. It remained at the same level in December, which was lower than many analysts had expected.

Several companies have said they will pass the tariff cost on to the U.S. Customers include Target, Walmart, and Adidas.

The cost of goods manufactured in the US using imported components is also expected to increase.

For instance, car parts often traverse multiple borders in the US, Mexico, and Canada before completing a vehicle’s assembly.

Trump was accused of throwing the global economy into turmoil by announcing tariffs ahead of his second presidential term.

However, in October 2025, the International Monetary Fund (IMF) stated that while financial markets had largely recovered, the overall economic picture remained volatile and that US tariffs were negatively impacting the economy.

It forecasts global growth of 3.2% for 2025 and 3.1% in 2026. That was a modest increase from its July predictions but below the 3.3% projected for both years before Trump announced the measures.

He believes the US economy will grow 2% in 2025 and 2.1% in 2026. This is lower than the 2.8% growth recorded in 2024 but still the fastest among the world’s most advanced economies.

Recent US data shows the economy gaining momentum in the three months to September 2025 as consumer spending rebounded and exports increased.

The economy grew at an annual rate of 4.3%, up from 3.8% in the previous quarter. This was better than expected and marked the strongest growth in two years.

Imports – which count against growth – continued to decline during this period.