'To take effect immediately': What are Trump's reciprocal tariffs, and who pays them? Here's your complete guide

US President Donald Trump is set to introduce a new wave of "Liberation Day" tariffs, which will take effect immediately after his announcement on Wednesday (April 02), White House Press Secretary Karoline Leavitt confirmed.

"My understanding is that the tariff announcement will come tomorrow, they will be effective immediately," Leavitt told reporters on Tuesday, adding that she had just spoken to Trump about the matter.

So, what do these tariffs mean, who actually pays for them, and how could they affect consumers? Here’s a closer look.

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How tariffs work and who pays for them?

A tariff is a government-imposed tax on goods imported from other countries. While these levies are meant to make foreign products less competitive, the reality is that the costs often get passed along the supply chain.

Contrary to popular belief, tariffs are not paid by foreign governments. Instead, US-based importers bear the direct financial burden. However, the impact doesn’t stop there:

• Consumers in the US often face higher prices as businesses raise costs to cover the tariffs.
• Retailers and manufacturers using imported materials may see rising production expenses, forcing them to either absorb the losses or increase prices.
• Foreign suppliers may cut their prices to stay competitive, reducing their profits.
• Some governments respond by devaluing their currencies or offering tax rebates to counterbalance the tariffs, as China has done previously.

Trump’s strategy: What is he trying to achieve?

Trump views tariffs as a flexible economic tool, using them to pressure trade partners and support US industries. His administration argues that these tariffs will:

• Put pressure on Canada, Mexico, and China to reduce illegal migration and drug trafficking into the US.
• Protect key industries, such as steel, aluminium, and copper, which are vital to national security.
• Support domestic car manufacturers by imposing higher import duties on foreign vehicles.
• Level the playing field by introducing "reciprocal" tariffs, preventing other countries from imposing higher taxes on American exports.
• Generate significant revenue, which Trump claims will help fund tax cuts, government spending, and even balance the federal budget.

How will these tariffs impact consumer prices?

Since the tariffs will target major trading partners, the costs of everyday goods could rise.

Food prices – Fresh produce from Mexico, such as avocados, tomatoes, and strawberries, may become more expensive within weeks.

Alcohol and beverages – Beer, tequila, and other spirits could see significant price hikes, as Mexico supplies a large share of US agricultural imports.

Electronics and automobiles – Prices may stay steady for a while due to existing inventory, but if tariffs remain in place, expect higher costs on cars and tech products.

Despite warnings from economists and trade experts, Trump has played down concerns about price hikes, telling Congress, "There will be a little disturbance, but we are OK with that. It won’t be much."

However, history suggests that American businesses and consumers will ultimately bear the cost, just as they did during his first term.