President Donald Trump has announced a comprehensive tariff plan on Wednesday (April 2), targeting trillions of dollars’ worth of imported goods. In his Liberation Day speech, US President Donald Trump asserted that it will boost domestic manufacturing, jobs, industries and generate trillions in federal revenue.
In a major setback for Indian and other foreign auto companies, Donald Trump said US will levy 25% tariff on all foreign automobiles effective midnight.
Reciprocal tariffs on India, China, other nations
US President Donald Trump has announced a 26% “reciprocal tariffs” on India, 34% on China, 20% on EU, and 24% on Japan.
Trump called Indian Prime Minister Narendra Modi as his friend in his speech, but said tariffs imposed on US ‘very, very tough’.
HUGE tax cuts coming
US President Donald Trump said: “Now we’re going to pass the largest tax cuts in American history.
Understanding tariffs
Tariffs are taxes imposed by a government on imported goods. These fee are paid by US-based companies when they bring products into the country. The collected revenue goes to the US Treasury, making tariffs a source of government income. The tariff amount is calculated as a percentage of the declared value of the imported goods before they enter the United States.
For example, if a US retailer imports sneakers from China, it must pay a tariff to Customs and Border Protection before the shoes can be sold in American stores. Similarly, manufacturers that rely on imported parts or materials must pay tariffs before they can use them in production. These additional costs can then affect businesses and consumers alike.
Trump’s justification for tariffs
President Donald Trump has cited multiple reasons for imposing tariffs: He has used tariffs as a tool to:
Combat unfair trade practices – Trump claims that tariffs counteract foreign nations that impose their own tariffs on US goods.
Revamp domestic manufacturing – By making foreign goods more expensive, tariffs could encourage businesses to produce more in the US.
Generate government revenue – Trump has suggested that tariffs could replace income taxes as a major funding source for the federal government.
Address foreign policy concerns – Early in his presidency, Trump linked tariffs on Canada, Mexico, and China to their handling of fentanyl exports.
Leverage negotiations – He has used tariffs as a bargaining chip, threatening other nations with higher tariffs to secure trade or policy concessions.
How tariffs affect businesses
Tariffs increase the cost of importing goods, which impacts companies differently depending on their industry and reliance on foreign materials. Some key effects include:
Higher production costs – Many US businesses rely on imported raw materials and components. Tariffs make these inputs more expensive, leading to increased overall costs.
Reduced investments – If companies absorb the tariff costs instead of passing them to consumers, they may have less capital for expansion, research, or hiring new employees.
Automation over jobs – While tariffs aim to bring manufacturing back to the US, modern factories use automation, meaning job creation could be limited compared to past industrial booms.
Expensive domestic manufacturing – Producing goods in the US involves higher labor and regulatory costs, making it more costly than offshore production despite tariffs.
How tariffs affect consumer prices
The impact of tariffs on consumer prices depends on how businesses respond:
Price increases – Many companies pass the higher costs onto consumers, leading to more expensive goods, from everyday items like shoes to larger purchases like cars.
Business cost absorption – Some firms choose not to raise prices, but this can reduce their profitability and ability to expand, potentially leading to layoffs.
Market shifts – Consumers may switch to alternative products, while companies might source from countries not subject to tariffs.
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Business NewsNewsUs NewsDonald Trump’s tariff announcement: What tariffs are, how they work, & their impact on businesses and prices—EXPLAINED
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