Trump’s long-threatened 25% tariffs against Canada and Mexico came into effect in Washington DC, as did a new 10% levy against China. Canada had vowed that it too would impose 25% tariffs against $107bn worth of US goods when Trump’s tariffs kick in. China swiftly announced its countermeasures, including 10-15% tariffs on some US agricultural goods. Beijing has also targeted various US firms in aviation, defense and tech by adding them to an “unreliable entity list” and imposing export controls.

Mexico is expected to announce its response later. President Claudia Sheinbaum said on Monday that her country has made “contingency plans.” Tariffs are essentially a tax on imports from other countries, designed to protect against cheaper competition from elsewhere and boost businesses and jobs at home. President Trump also sees them as a substantive way of raising tax money.

However, in practice, they can have detrimental effects on the well-being of both consumers and businessesincluding the ones they set out to protect. If tariffs are passed on, shoppers can bear the bulk of the burden in the form of higher prices and fewer choices.

Tariffs trigger Retaliation

Meanwhile,tariffs tend to trigger retaliationfrom targeted countries, disadvantaging businesses who are looking to export their goods there. So ultimately, tariffs can hold back trade, growth, and indeed job creation – which is why these moves by President Trump have caused such consternation around the globe.

US firms are worried about the blowback. It is not just companies bringing products into the US that are worried about the tariff fight. US-based exporters are concerned too.

Scott Beggs leads a US manufacturing business in Mississippi that employs more than 100 people making products including wood paneling and backyard ziplines.

Hes been pushing to expand into Canada, with some success. But in recent weeks, his Canadian buyers have been putting their orders on hold, angry about US actions and expecting their government to retaliate. Canada has said its retaliatory tariffs would kick in as soon as the US levies come into effect. All my efforts for the last four to five years are going to go down the waste, Mr Beggs said.

Protectionism

Analysts are warning that President Trumps tariffs could harm global trade, but he has insisted they are needed to “protect” Americans and the US economy. Protectionism is an economic policy of restricting imports to protect domestic industries from foreign competition. Governments can use tariffs, quotas and subsidies to make foreign goods more expensive and harder to get.

The idea is to get consumers to buy locally, protecting jobs and boosting the national economy. But protectionism is not without its costs: it can raise prices for consumers and can spiral into trade wars, with countries imposing counter-tariffs on imported goods.