What is a tariff, how they work and why Donald Trump is imposing them

Since Donald Trump was sworn in as US president on January 20 there has been one word that has dominated his tenure so far - tariffs.

Two weeks into his second term as president Trump announced he will impose 25% trade taxes on goods coming from America’s nearest neighbours and largest trade partners – Canada and Mexico – as well as a 10% levy on Chinese goods.

All three nations have vowed to respond in kind - sparking fears of a global trade war.

And overnight (February 3), Trump sparked fears that he is poised to expand his tariff regime to both the UK and the EU. Asked by the BBC early on Monday if he would target the UK with tariffs, Mr Trump said: “UK is out of line, but I’m sure that one… I think that one can be worked out.”

On the EU Trump said tariffs will 'definitely' be placed on goods from the bloc, saying “they take almost nothing and we take everything from them”. EU officials have now started drawing up contingency plans incase they are imposed.

As we expect to hear more about tariffs in the coming days and weeks, what are they and how do they affect people?

Tariffs are typically calculated as a percentage of the price a buyer pays to a foreign seller. In the United States, these tariffs are collected by Customs and Border Protection agents at 328 ports of entry across the nation.

US tariff rates vary: for example, they are generally 2.5% on passenger cars and 6% on golf shoes. Tariffs can be lower for countries with which the US has trade agreements.

For instance, most goods can move among the US, Mexico and Canada tariff-free due to Mr Trump’s US-Mexico-Canada trade agreement. Mainstream economists tend to view tariffs sceptically, considering them an inefficient method for governments to raise funds