Pros and cons of tariffs

Donald Trump has said he will impose a 25% tariff on all cars and some automobile parts that are shipped into the US. The tariffs will also apply to vehicles from American brands whose cars are assembled outside the country.

The aim of the measure is "to bring car factories" to the US, said The New York Times, "but the tariffs could disrupt supply chains for carmakers and raise costs for consumers".

They will kick in on 2 April – a day Trump has dubbed "Liberation Day". The president is also expected to unveil other industry-specific tariffs, which might include semiconductors and pharmaceutical drugs. Trump "has long argued that the US is being cheated by its trading partners and that tariffs are the best remedy", said The Guardian.

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Pro: increases government revenue

Tariffs are essentially another form of tax and as such generate revenue for governments. Trump has claimed tariffs created "vast wealth for our country" and "will pay off our debt and MAKE AMERICA WEALTHY AGAIN!"

A quick look at the data behind this claim "tells a compelling story", said Sky News' economics editor Ed Conway. Indeed, "for nearly all of the 19th century, tariffs imposed on goods imported into America provided more than half the government's revenues."

Yet as a source of revenue relative to the size of today's global economy, income from tariffs is "modest", said the Council on Foreign Relations.

Con: impact on consumers and economy

One of the "most immediate impacts of tariffs is a rise in consumer prices", said EV Magazine. Studies by the National Bureau of Economic Research on Trump's first term suggest "most of the economic burden" of increased tariffs "was ultimately borne by US consumers", BBC Verify said.

Significant short-term price hikes on imported goods, ranging from electronics and cars to everyday groceries, could in turn "contribute to inflationary pressure", said EV Magazine, forcing central banks to "raise interest rates, potentially slowing economic growth and increasing borrowing costs for businesses and consumers".

The problem, said Sky News' Conway, is that "there is only so high one can lift these fees before they begin to stifle activity, making goods so expensive to import that domestic consumers face economic damage."

Because tariffs are "in essence a tax on consumers", Trump's Liberation Day offers the "sort of liberation that most corporate bosses and investors would happily do without", said The Economist. The upside is that 2 April "will at least bring certainty" about the president's economic path. The tariffs will likely "put downward pressure on US economic growth", according to ABC News. Goldman Sachs has "hiked its odds of a recession from 15% to 20%".

Pro: protect domestic businesses and jobs

"In most cases" tariffs are "intended to protect local industries by making imports more expensive and driving consumers to domestic producers", said the Council on Foreign Relations. Supporters argue that tariffs incentivise companies to manufacture goods within their own country, reviving industry while bolstering supply chain resilience.

"Longstanding concern" about the loss of manufacturing jobs to countries with lower labour costs has been a main driver for the anti-globalisation movement in the developed world, said the BBC. Trump has told American workers that they no longer need to be "worried" about losing their jobs to "foreign nations". Instead, he said, "foreign nations will be worried about losing their jobs to America".

Con: lobbying and corruption

Tariffs often lead to "cascading protectionism and create a fertile ground for corruption", said the free-market think tank the Cato Institute. Trump's 2018–19 tariffs on China led to "a complex process of exclusion requests" and "lobbying".

In the absence of appropriate oversight, tariff exemptions "become political currency – traded between firms and officials in what amounts to a pay-to-play arrangement", said Forbes. Rather than economic factors, decisions are determined by "lobbyists, campaign contributions, and political connections".

Pro: protecting national interests

Politically, tariffs can be used as an "extension of foreign policy", said Investopedia. Imposing them on a trading partner's significant exports "may be used to exert economic leverage".

The use of tariffs as a "negotiating tool" with other countries "might well be their main function in the hands of Mr Trump", said Conway. Take the recent 25% levies imposed on Mexican and Canadian goods, which are aimed at forcing both governments to stop the flow of illegal immigrants and supply of fentanyl into the US. Trump has already successfully wielded the threat of tariffs to break a deadlock with Colombia over the return of deported migrants.

Con: retaliatory tariffs

Retaliatory – or tit for tat – tariffs are among the "multifaceted harms of protectionist measures", said the Cato Institute.

A 2024 study by economists from international universities and the World Bank concluded that retaliatory levies imposed by China and other nations on US goods during Trump's first term had "negative employment impacts", especially for farmers.

But "if Trump’s trade war fizzled as policy" it "succeeded as politics", said NBC News. Support for Trump and Republican congressional candidates rose "in areas most exposed to the import tariffs, including the industrial Midwest and manufacturing-heavy Southern states like North Carolina and Tennessee".