() President Donald Trump is following through on his campaign promise to impose tariffs on America’s top trading partners a decision that could come at a high cost to U.S. consumers.

Trump said Friday he would place a 25% tariff on imports from Canada and Mexico, as well as a 10% additional tariff on all imports from China. Energy resources from Canada will have a lower, 10% tariff.

The president wrote on Truth Social that the tariffs are meant to end “the decades long RIPOFF OF AMERICA” with regard to “TRADE, CRIME, AND POISONOUS DRUGS.”

The tariffs against Mexico have since been paused after Trump said he struck a deal with President Claudia Sheinbaum to supply 10,000 Mexican soldiers to the U.S.-Mexico border.

Nevertheless, Trump has acknowledged that American consumers could bear some of the cost of the tariffs.

“We may have short-term, a little pain, and people understand that,” Trump told reporters on Sunday.

Here’s what to know about tariffs and how they could impact your wallet:

What are tariffs, and how do they work?

Tariffs are taxes on goods imported from other countries. They are typically charged as a percentage of the price a buyer pays a foreign seller.

So, a 25% tariff on a $4 good shipped from Canada or Mexico would face an additional $1 charge.

When companies import goods from abroad, they pay the tariffs to the U.S. government. However, economists warn those costs eventually get passed on to American consumers through higher prices.

Who pays for tariffs?

Companies importers pay tariffs on goods from abroad, and the money goes to the U.S. Treasury. If that sounds counterproductive, many economists argue that it is.

When companies face higher costs, consumers usually end up footing the bill.

For example, Trump imposed a tariff on imports of washing machines in 2018. Researchers estimate the price of washing machines increased by around 12%, about $86 per unit.

The Budget Lab at Yale University estimates Trump’s tariffs would cost the average American household $1,000 to $1,200 in annual purchasing power. Another estimate by the Tax Foundation says the tariffs will amount to an average tax increase of more than $800 per US household in 2025.

Even Trump has acknowledged Americans could feel “some pain” from the emerging trade war.

“WILL THERE BE SOME PAIN? YES, MAYBE (AND MAYBE NOT!),” Trump wrote on Truth Social. “WE WILL MAKE AMERICA GREAT AGAIN, AND IT WILL ALL BE WORTH THE PRICE THAT MUST BE PAID.”

While companies pay tariffs, they can indeed hurt foreign countries by making their products pricier and harder to sell abroad. Foreign companies could cut prices to offset the tariffs to maintain their market share in the U.S.

Why does Trump want tariffs?

Trump argues tariffs are a way for the U.S. to strike back against foreign countries he sees as ripping off America in terms of “TRADE, CRIME AND POISONOUS DRUGS.”

The president defended his tariffs on Canada in a social media post on Sunday: “We pay hundreds of Billions of Dollars to SUBSIDIZE Canada. Why? There is no reason. We don’t need anything they have. We have unlimited Energy, should make our own Cars, and have more Lumber than we can ever use. Without this massive subsidy, Canada ceases to exist as a viable Country. Harsh but true!”

Trump went on to say Canada should become our “Cherished 51st State.”

Canada is the largest source of U.S. energy imports, and, last year, 60% of U.S. crude oil imports came from America’s northern neighbor, according to the U.S. Energy Information Administration.

Previously, Trump said the tariffs against Canada and Mexico would remain until the countries crack down on the flow of drugs and “illegal aliens” coming into the U.S.

He said the additional tariff on China will stay until the country stops drugs, particularly fentanyl, from coming to the U.S.

What impact do tariffs have on the economy?

The effects of tariffs have long been debated, but economists on both sides of the aisle generally agree the costs tend to outweigh the benefits.

Americans could see higher prices on a range of goods the U.S. imports from its top three trading partners, including vehicles, fruits and vegetables, smartphones, toys, laptops and even fuel at the pump.

Tariffs can also lead to retaliation, with foreign countries responding by slapping their own taxes on goods from the U.S. After Trump’s announcement, Canada immediately ordered retaliatory tariffs on American goods.

Those who support tariffs often argue they prevent American businesses from offshoring jobs, but it’s not that simple.

Workers who produce the specific goods covered by tariffs often benefit, but tariffs can also hurt workers in other industries that rely on those imports.

In other words, a government tariff may be trading jobs in one industry at the expense of jobs in another.

A 2024 paper by a group of top economists looked at Trump’s 2018 tariffs and found that “import tariffs on foreign goods neither raised nor lowered U.S. employment in newly-protected sectors.” However, retaliatory tariffs had “clear negative impacts,” primarily in agriculture.

Will the US make money off of the tariffs?

The Tax Foundation estimates the tariffs will generate around $100 billion a year in extra federal tax revenue but they could also hurt the broader economy.

The tariffs are expected to shrink economic output by 0.4% and eliminate hundreds of thousands of jobs, the Washington, D.C.-based think tank found.

Certain sectors will be hit harder than others.

Gas prices could surge as much as 50 cents per gallon in the Midwest, as Canada and Mexico supply more than 70 percent of crude oil imports to U.S. refineries, according to the Council on Foreign Relations (CFR).

A 25% tariff on Canada and Mexico will also raise production costs for U.S. automakers, adding up to $3,000 to the price of some cars sold in the U.S., CFR said.

Mexico is also the United States’ biggest source of fresh produce, supplying more than 60% of vegetable imports.

Can Congress prevent Trump from imposing tariffs?

The president has a few sources of legal authority to impose tariffs without congressional approval.

In its tariff announcement, the White House cited the International Emergency Economic Powers Act (IEEPA), which gives the president broad authority to deal with international economic emergencies.

“The extraordinary threat posed by illegal aliens and drugs, including deadly fentanyl constitutes a national emergency under the IEEPA,” the White House said.

Companies could try to fight the higher tariffs in court but such challenges would likely face “a steep uphill climb,” the Center for Strategic & International Studies noted in a 2024 report.

The U.S. Constitution empowers Congress to set import tariffs but in dozens of statutes, Congress has authorized the President to adjust tariff rates in response to “specific trade-related concerns,” according to the Congressional Research Service.

Still, Congress does have some oversight responsibilities. Trump’s order requires the Homeland Security Department in consultation with other agencies to “submit recurring and final reports to the Congress on the national emergency,” the Associated Press reported.

How are Canada, Mexico and China responding to the tariffs?

Mexico: Mexican President Claudia Sheinbaum quickly responded to Trump’s announcement by vowing to enact retaliatory tariffs. However, that plan is on pause for at least a month after Sheinbaum and Trump struck a deal on Monday that involves ramping up border security.

Canada: Canadian Prime Minister Justin Trudeau said his nation would respond with 25% tariffs on more than $100 billion of U.S. goods. Several Canadian provinces have already started pulling American-made liquor from store shelves. Trump and Trudeau were reportedly on a call Monday afternoon.

China: The Foreign Ministry criticized the tariffs and said China “will take necessary countermeasures to defend its legitimate rights and interests” in a statement. China said the tariff hikes violate World Trade Organization rules and “does not benefit either side.”

The Associated Press contributed to this report.