Trump vows 25% tariff on imports from Mexico, Canada: What are tariffs?

President-elect Donald Trump announced Monday he plans to impose a 25% tariff on all products coming into the U.S. from Mexico and Canada as one of his first acts back in the White House.

On the campaign trail, Trump frequently touted tariffs as a way to negotiate with other countries. In a post on Truth Social, he said he wants Canada and Mexico to do more to stop migrants and fentanyl from coming into the U.S. He also said he would impose another 10% tariff on top of the tariffs already in place on Chinese goods.

But economists have warned that tariffs could harm the economy. Here is what to know about the tax on imports:

Tariffs and your wallet: Trump's tariffs on Mexico and Canada could raise the prices of these goods

What are tariffs?

A tariff is a form of tax imposed on imports from another country. The business buying goods from another country pays the additional fee, but many experts agree the extra costs get passed onto consumers.

Economic theory generally shows higher trade barriers raise consumer prices and negatively impact economic output and income, according to the Tax Foundation, a nonpartisan tax policy nonprofit.

Experts say the argument for tariffs is to increase demand for domestic manufacturers, even though they are also part of the global supply chain that could be impacted by tariffs. National security is also an argument for using tariffs to ensure domestic production.

Trump tried tariffs in his first term

Trump waged a trade war in his first term, imposing tariffs on billions of dollars of Chinese-made goods. The two countries eventually signed a trade deal that was meant to lead to more trade talks down the line. Those plans were thwarted by the COVID-19 pandemic.

While Trump often criticized the Biden administration on trade, President Joe Biden kept many of Trump's tariffs in place and increased tariffs on targeted items such as Chinese electric vehicles and solar panels.

While campaigning, Trump floated this 25% tariff on Mexico he is now vowing to carry out, but only if the country would not help mitigate immigration to the U.S. southern border. He also suggested a 10-20% tariff on all goods and a 60% tariffs on Chinese goods.

Those would mean average tariff rates at highs not seen since the Great Depression, according to the Tax Foundation.

Experts wary of tariffs' impact on consumers

More than 10 analyses show Trump's proposed tariffs altogether would have a harmful effect on the American economy, according to the Tax Foundation.

The Tax Foundation analysis found the tariffs together add up to $79 billion, which theoretically leads to an additional $625 in taxes annually for the average U.S. household. The Tax Foundation also argues the tariffs would raise prices while reducing output and employment.

Estimates put the tariffs' possible impact on consumers in perspective:

• The National Retail Federation projected $7,600 in additional costs per U.S. household annually if Trump's tariffs are imposed.

• The Peterson Institute for International Economics a middle-income family could pay an estimated $1,700 more a year.

Trump says he would deploy these tariffs as a strategy to fight illegal immigration, drugs and crime.

“This Tariff will remain in effect until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop this Invasion of our Country!” he wrote on Truth Social. “Both Mexico and Canada have the absolute right and power to easily solve this long simmering problem. We hereby demand that they use this power, and until such time that they do, it is time for them to pay a very big price!”

Contributing: Michael Collins, Karissa Waddick, George Petras, Janet Loehrke

Kinsey Crowley is a trending news reporter at USA TODAY. Reach her at [email protected], and follow her on X and TikTok @kinseycrowley.

This article originally appeared on USA TODAY: What are tariffs? Trump has promised to hit Mexico, Canada with them