Key points
- Usually raise prices for consumers and businesses that rely on imports.
- Can lead to retaliation and trade wars, hurting exporters.
- Companies may move supply chains to avoid them, which takes years.
Example
A 25% tariff on a $100 imported component raises its cost to $125 for the importer, who may absorb it, pass it on to customers or switch suppliers.
In history
The US-China trade war of 2018-19 raised tariffs on hundreds of billions of dollars of goods. In April 2025 sweeping new US tariffs sent the S&P 500 down about 10% in two days, before most were paused a week later.
Related terms