What you almost certainly know right now is that the U.S. is imposing tariffs on a wide variety of goods from Canada, Mexico, and China.
What you know past that … honestly, it’s probably going to vary from one reader to the next, for a number of reasons.
Chief among those reasons: The majority of Americans don’t understand tariffs in the first place. In an Ipsos survey taken in mid-December 2024, only 45% of Americans demonstrated that they knew how tariffs worked—31% answered incorrectly, while the remaining 23% flat-out said they just didn’t know.
But even if you understand how tariffs work generally, the flow of news about import taxes since the start of President Donald Trump’s second term has been frankly unprecedented. The past few days alone have been murder on anyone—businesses, agencies, journalists, and more—trying to get a complete picture of these tariffs, which ultimately could impact more than a trillion dollars of trade with just three partners.
Today, we’re going to do our best to get you up to speed, and we’re going to do it from the ground up. That means not only outlining the specifics of tariffs on Canadian, Mexican, and Chinese imports, but also explaining basics such as what tariffs are, how they work, and why countries impose them in the first place.
What is a tariff?
A tariff is just a tax. Specifically, it’s a tax that a country’s government imposes on goods and/or services that it imports from other countries.
So when you hear “tariff,” just think “tax.”
Tariffs usually are charged as a percentage of the cost that domestic purchasers pay to buy those goods or services from a foreign seller. For instance, the headline numbers on the Trump tariffs are 25% on most goods imported from Canada and Mexico, and 20% on virtually all goods imported from China.
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Who pays tariffs, and who collects them?
You might have heard that when the U.S. places a tariff on other countries’ products, those countries have to pay the tariffs.
That’s simply not true.
Young and the Invested Tip: Tariffs can lead to higher prices on a wide variety of goods. Here are 8 goods that could begin delivering serious ticker shock.
U.S. businesses that import goods (retailers, for instance) pay U.S. tariffs on imported goods directly to the U.S. government.
And most of the time, you, the consumer, indirectly pay part or all of those tariffs. Because businesses rarely eat the whole cost—they usually raise prices to account for much if not all of the import cost.
Don’t take it from us—take it from the CEOs of retailers like Walmart (WMT) and Target (TGT), who have already indicated that Trump’s tariffs could filter into retail prices “within days.”
It’s an open question as to how much of those tariff costs you and I will end up eating. But independent, nonpartisan think tank The Tax Foundation found that tariffs levied by Trump during his first term “were passed almost entirely through to US firms or final consumers.”
According to another independent, nonpartisan think tank, the Urban-Brookings Tax Policy Center (TPC), the 25% “blanket” tariffs imposed on Canadian and Mexican imports could cut into Americans’ after-tax incomes by an average of $930 in 2026. That doesn’t even account for the Chinese tariffs!
An example of how tariffs work
It’s a lot easier to understand when you break the process down into steps. So, here’s a hypothetical example based on one of the major Trump tariffs:
- A U.S. grocer normally pays a Canadian supplier $20 per jug of maple syrup, then sells it to consumers for $22.
- The U.S. levies a 25% tariff on all goods imported from Canada, meaning that jug of maple syrup is subject to a 25% tax.
- The next time the U.S. grocer imports maple syrup, it still pays the Canadian supplier $20 per jug. However, when that maple syrup reaches an American port of entry, U.S. Customs and Border Protection agents also collect the 25% tariff (so, an additional $5 per bottle) as that syrup clears customs.
- The grocer, now paying $25 per jug of maple syrup, decides to pass 80% of the tariff costs (so, $4) on to the consumer. It absorbs 20%, which cuts into its profit margins.
- The consumer now pays $26 for the jug of maple syrup—an 18% increase from the $22 they used to pay.
Trump’s 2025 tariffs, country-by-country
Next up, we’ll look at the tariff situation for Canada, Mexico, and China.
But before I do, a note. All the information here is as of noon Friday, March 7. I say that because America’s tariff policy has been … well, fluid.
Trump originally announced tariffs on China, Canada and Mexico in early February, only to delay instituting tariffs on the latter two until March.
Young and the Invested Tip: Tariffs aren’t the only taxes you need to worry about right now. Tax season is under way, and this tax-prep checklist can get you ready.
And just during the time that I was writing this primer on tariffs, several aspects of the tariffs on Canadian and Mexican imports changed significantly. Within days of the March implementation announcement, Trump …
- Delayed tariffs on vehicles and auto parts imported from Canada and Mexico until April 2.
- Reduced tariffs to 10% on potash imported from Canada and Mexico.
- Delayed tariffs on any goods from Canada and Mexico that are considered compliant with the United States-Mexico-Canada Agreement (USMCA).
That last point is perhaps the most crucial, as roughly half of Mexican imports and 38% of Canadian imports fall under the USMCA exemption. It also means some of the specific imports listed below won’t actually be taxed until April 2.
And if you wait a few days to read this email, check out our full article to see if there have been any updates. Given how rapidly America’s tariff policy is shifting, it’s possible a few of the details will have changed.
1. Canada
The current tariff situation with Canada, our largest trading partner:
- Original tariff (announced March 3): 25% blanket tariff on virtually all imports from Canada, 10% on “energy resources”
- Changes to tariffs:
- Tariffs on automobiles and auto parts delayed until April 2
- Tariffs on potash reduced to 10%
- Tariffs on Canadian imports considered compliant with USMCA delayed until April 2
- Noteworthy imports affected: Lumber, crude oil, machinery, a wide variety of foods and live animals (including beef, pork, poultry, cheese, milk, butter, fruits, vegetables, wheat, barley, oats, and more)
The automotive tariffs are among the most impactful, as both Canada and Mexico are integral to America’s auto supply chain. The industry has been deeply worried about the impact on both consumers, who could pay $4,000 to $10,000 more per vehicle, and automakers, which experts believe could suffer job losses in the hundreds of thousands.
And maple syrup. Oh, the syrup! Yes, we technically can get syrup from Vermont—the Green Mountain State’s pancake glaze is terrific. However, tariffs will impact not just Canadian syrup imports, but also maple syrup manufacturing equipment used by American maple producers. And that equipment is largely made in Canada, too.
2. Mexico
The current tariff situation with Mexico, our second-largest trading partner:
- Original tariff (announced March 3): 25% blanket tariff on virtually all imports from Mexico
- Changes to tariffs:
- Tariffs on automobiles and auto parts delayed until April 2
- Tariffs on potash reduced to 10%
- Tariffs on Mexican imports considered compliant with USMCA delayed until April 2
- Noteworthy imports affected: Produce, liquor, beer, computers, crude oil, medical instruments
And you don’t even have to ask—yes, avocados are included in all this.
Whether they’re on their own, in sushi, in guacamole, or served with condensed milk (thanks, Philippines!), or briefly sponsoring a bowl game, avocados are one of Mexico’s greatest exports. But they’re about to get significantly more expensive—and there’s little getting around this tariff. The USDA says roughly 90% of all avocados consumed in the United States are imported from Mexico.
3. China
The current tariff situation with China, our third-largest trading partner:
- Original tariff (announced Feb. 1): 10% blanket tariff on all imports from China
- Changes to tariffs:
- Additional 10% blanket tariff on all imports from China (announced March 3)
- Noteworthy imports affected: Electronics (computers, tablets, phones, and more), clothing, toys, games, sporting goods, auto parts
The U.S. imported a massive $32 billion worth of toys, games, and sporting goods from China. Indeed, according to The Toy Association, an industry group, America sources almost 80% of its toys from China—and the U.S. can expect to pay 15% to 20% more for toys come the 2025 back-to-school shopping season.
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What are retaliatory tariffs?
Tariffs can significantly damage demand for a nation’s goods and services. So, as you can imagine, countries often don’t take these kinds of measures sitting down. Quite the opposite: They frequently clap back with tariffs of their own.
The impact of other nations’ tariffs is different on our end. Many U.S. consumers might never notice that a country has suddenly levied a tax on some of our imports … but American businesses will.
A very quick look at retaliatory tariffs issued or threatened by Canada, Mexico, and China:
- Canada: In March, announced 25% tariffs on $30 billion in goods originating from the U.S., including live poultry, meat, pork, milk, cream, eggs, numerous fruits and vegetables, wine, beer, spirits, tobacco, various toiletries, tires, wood products, apparel, tools, and more. Canada will delay implementing tariffs until April 2.
- Mexico: In March, announced that the country will respond to America’s tariffs with 25% tariffs on U.S. goods. However, following the monthlong reprieve for USMCA-compliant imports, it appeared Mexico would delay announcing or implementing any reciprocal tariffs.
- China: In February, announced 10%-15% tariffs on crude oil, liquefied natural gas, petroleum, coal, farm machinery, motor homes, trucks, and more. In March, announced 10%-15% tariffs on chicken, wheat, corn, cotton, sorghum, soybeans, beef, seafood, fruit, vegetables, dairy products, and more.
Tariffs are hardly new … but these are different
While the country-specific tariffs have gotten the most media play, they’re not even the only import taxes Trump has levied this year. In February, he also reinstated a 25% tariff on steel imports (originally instituted during his first term) and increased tariffs on aluminum imports from 10% to 25%.
And Trump is hardly the only president to use tariffs.
Young and the Invested Tip: How much will you pay in taxes on your investments? To figure that out, you’ll need to know the capital gains tax rates for 2024 and 2025.
In September 2024, then-President Joe Biden raised existing tariffs on a host of goods made in China, including a 100% tariff on electric vehicles (EVs), 25% on lithium-ion EV batteries, and 50% on semiconductors and solar cells. The Obama administration had imposed 35% tariffs on tires imported from China. George W. Bush enacted tariffs on a variety of steel products. Heck, John F. Kennedy placed tariffs on imported steel.
In short: Tariffs themselves are nothing out of the norm.
However, Trump’s most recent slate of tariffs are unusual, if not unprecedented, for a few reasons:
- They’ve been levied on whole countries, not just targeted industries.
- They’ve been levied, in the cases of Canada and Mexico, on two of our closest allies.
- They’ve been levied against our three largest trade partners, two of which (Canada and Mexico) are part of a continental trade pact—the USMCA, which replaced the North American Free Trade Agreement (NAFTA)—that Trump himself brokered during his first term.
And perhaps most importantly, they’re constantly being tinkered with. There have been multiple delays, additional carve-outs, and threats of tariffs against still more countries.
Tariffs can be useful at solving any number of problems (which we outline in our full article). It’s within the realm of possibility that taxing imported goods from our three largest trading partners could, while painful now, end up being beneficial to America.
But the rapid and drastic changes in policy are almost inarguably harmful. In a variety of media reports, corporate chiefs have bemoaned the unstable tariff landscape, noting that it makes it exceedingly difficult to form long-term plans. We’ve received communications (both professionally and personally) from contacts in a wide array of businesses expressing the same sentiment. And based on stock performance, investors don’t appear to be taking these frequent shifts in stride, either.
Unfortunately, for now, all that most people can do is remain informed.
Riley & Kyle
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