In a highly anticipated move, President Donald Trump imposed a 10% baseline tax on imports from all countries and increased tariff rates on nations with trade surpluses to fulfill his pledge to address what the White House deems as unfair trade practices. Trump stated that the reciprocal tariffs were necessary to level the playing field by matching the tariffs that other countries impose on American goods.

Economists caution that tariffs act as a tax on importers, ultimately leading to higher prices for consumers. Despite this, the hope is that the reciprocal tariffs could incentivize other countries to reconsider their own tariff policies.

The tariffs collected by the U.S. government go into the Treasury to support federal expenditures, with Congress holding the authority to allocate the funds. President Trump aims to use the increased tariff revenue to fund tax cuts, primarily benefiting high-income households by extending tax cuts set to expire in 2025.

The impact of the tariff policy on prices will vary depending on how businesses respond, but consumers could see price increases within a month or two of the tariffs taking effect, with some products potentially experiencing more immediate price hikes.