Tariffs Explained: What They Mean for You as Canada-Mexico Duties Start Next Week

President Donald Trump has made tariffs the key economic buzzword since reentering the White House, alarming economists everywhere. As some of the biggest proposed tariffs against Canada and Mexico have been continually delayed and then pushed forward again, even the less economically savvy among us are probably wondering now: What are these tariffs actually going to mean for me?

While Trump deployed tariffs in his first term, notably against China, he ramped up his plans for them much more on the 2024 campaign trail, promising steeper 60% tariffs against China and a universal 20% tariff on all imports into the US. “Tariffs are the greatest thing ever invented,” Trump said during a Michigan campaign stop last year. More recently, he called himself “Tariff Man” in a post on Truth Social.

To date, the tariffs imposed by the second Trump administration haven’t been as extreme as the ones he initially promised, but they have been significant. These tariff threats have resulted in tensions between the US and its neighbors Mexico and Canada. They have also caused concerns about the cost of living as prices have continued to creep up.

So what are tariffs exactly? And more to the point, what do they mean for the prices you’ll see while crossing things off your shopping list? The short answer: Expect to pay more for at least some goods and services.  

For the longer answer, keep reading, and for more, find out how tariffs might impact the price of a particular popular gaming console.

What is a tariff?

Put simply, a tariff is a tax on the cost of importing or exporting goods by a particular country. Therefore, a 60% tariff on Chinese imports would be a 60% tax on the cost of importing computer components from China.

Trump has been fixated on imports as part of his economic plans, often claiming that the money collected from taxes on imported goods would help finance other parts of his agenda. The US imports roughly $3 trillion worth of goods from other countries every year.

Who pays the cost of a tariff?

During his 2024 presidential campaign, Trump repeatedly claimed that the country where an imported good is coming from pays the cost of the tariff and that Americans would not see any increase in prices from them. However, as economists and fact-checkers stressed in response, this is not always the case.

The companies that are importing the tariffed goods — in this case, American companies or organizations — are the ones that pay the higher costs. To make up for those new costs, companies have a choice: Raise their prices or eat the additional cost themselves. So, who ends up paying the price for tariffs? In the end, usually you, the consumer. As recently as this month, Trump admitted that consumers might “feel pain” financially as his tariffs begin to take effect.

For example, a universal tariff on goods from Canada would increase Canadian lumber prices, which would have the knock-on effect of making construction and home renovations more expensive for US consumers.

Which tariffs have gone into effect?

Given how often Trump promises, threatens or simply muses about deploying specific tariffs, you’d be forgiven for not knowing which ones are actually in effect. 

While general tariffs against Canada and Mexico are not off the table, they have not been implemented yet and have been delayed twice. They were meant to begin at the start of February, but were pushed back to March 4 as US, Canadian and Mexican leaders continue to negotiate. On Feb. 26, Trump delayed them again to April 2, but only a day later, he said that they would go into effect on March 4. If and when these tariffs take effect, they will impose a 25% tariff on all goods from both countries, aside from Canadian crude oil, which will only have a 10% tax.

For now, the only active Trump tariff is a 10% tax on all goods from China that took effect on Feb. 4. A universal tariff on steel and aluminum from all foreign countries is set to take effect on March 12.

What will tariffs do to prices in the US?

Economists and American industry leaders have repeatedly warned that Trump’s tariff plans would increase prices across the board. Last year, the Peterson Institute estimated that Trump’s plans could end up costing each American family an extra $2,600 a year. More recently, the institute said that Trump’s specific tariffs against China, Mexico and Canada would cost families $1,200 more a year.

Economists have also warned that these tariffs would do the opposite of fighting inflation.

“For consumers, tariffs are like another form of inflation, just spelled differently,” Darpan Seth, CEO of the business strategy and software firm Nextuple, told USA Today. “They have the same effect of rising prices.” 

Patti Brennan, CEO of Key Financial, predicted in an email to CNET that no products would be safe from these price hikes and that tariffs “could have a systemic effect on [the cost of] goods,” even ones not coming from targeted countries.

“Even if products aren’t coming from the countries affected, companies can increase prices and just blame it on rising costs due to tariffs,” Brennan wrote. “They’ll assume the consumer is well aware of the issue of tariffs and test the boundaries until demand falls off.”

Brennan added that the cost of services should be safe from the impact of tariffs for now. As opposed to goods, which are the tangible products you buy, services are the things you pay for people or companies to do for you, ranging from haircuts and deliveries to legal work and medical care.

“Services should be relatively resilient, and consumers [already] spend more on services than on goods,” Brennan explained.

On Tuesday, Taiwanese computer hardware company Acer announced that the cost of its products would see a 10% increase in March, directly resulting from the Trump tariff on Chinese imports. The precise timing is uncertain, but at some point in March the company expects that products subjected to higher import taxes will start making it to retail. While other major players in the industry like Dell and Asus are expected to make similar moves eventually, Acer is, for now, among the first major hardware manufacturers to bump prices in response to tariffs. The company is the world’s sixth largest personal PC vendor by sales.

What is the goal of Trump’s tariff plan?

The typical goal behind tariffs is to discourage consumers and businesses from buying the tariffed goods. In the case of Trump’s plan, he has claimed that they will encourage more people to buy American-made products and more companies to create jobs in the US, and will punish overseas producers with shoddy working conditions.

Economists warn that these tariffs could instead lead to sustained price increases, job losses in the US and retaliatory tariffs on US exports by foreign countries, which would hurt American businesses.

Brennan said it’s hard to predict right now if tariffs will benefit the US economy long-term after the initial price shocks.

“It will be painful short-term, but it will reveal how resilient our economy is (or isn’t),” Brennan wrote. “If tariffs are successful in raising revenue, it could reduce the amount of our annual deficit (shortfall). This could postpone the need to increase taxes on all Americans. In the end, no one really knows what the outcome will be – for example, in spite of higher inflation than the Federal Reserve’s target of 2%, the dollar grew in value.

“Just as we don’t always win other types of wars, I’m not sure a trade war is going to accomplish the stated goals. What we do know is that we’ve already seen the impact tariffs have in negotiating with our neighbors on other issues” like border control and drug trafficking, he wrote.

“The leverage cannot be denied.”

For more, see how tariffs might raise the price of Apple products and find out some expert tips for saving money.