Tariffs are duties imposed on the import of certain goods or categories of products. Tariffs are intended to aid local producers and manufacturers become more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as protectionist tools, as are trade barriers and import quotas.

Although both tariffs and taxes generate government revenue to finance public goods and services, they have several differences. Fares are prepaid at the port of entry and taxes are paid at the time of purchase. Taxes are levied on individual taxpayers and businesses, while customs duties are paid by importers.

There are two schools of thought among economists regarding the operate of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive up prices in the long run and lead to a harmful trade war by encouraging tit-for-tat tariffs.

In the run-up to the November 2024 presidential election, Donald Trump has made clear that he intends to operate tariffs to support the U.S. economy and American manufacturers. In 2024, Mexico, China and Canada accounted for 42% of total U.S. imports. During this period, Mexico stood out as the largest exporter with $466.6 billion, according to the U.S. Census Bureau. That’s why Trump wants to focus on these three countries when imposing tariffs. It also plans to operate customs revenues to reduce personal income tax.