Could Trump’s tariffs change how the U.S. trades with the world?

The United States’ trade policy has shifted rapidly since the start of President Trump’s second term, leading many Americans to ask, “what is a tariff, and how do tariffs work in today’s global economy?” As Trump escalates his trade war with sweeping new tariffs on imports—including a 25% tariff on Canadian goods—now is a good time to explore who really pays for tariffs, and what tariffs mean for consumers, businesses, and local economies. Here’s what you need to know about Trump’s tariff policies and their impact on states like New Hampshire.

What are tariffs and how do they work?

A tariff is essentially a tax imposed by one country on goods and services imported from another country.

Who pays the tariff – the U.S. buyer or the foreign seller? Well, that depends on the contract between the two. Often the U.S. buyer will pay the tax to import the goods – and then they may choose to pass that tax onto consumers in the form of higher prices.

By making foreign purchases more expensive, tariffs may give a boost to businesses that sell the same product at home. For example, if the U.S. places a 25% tariff on imported steel, it may be cheaper to buy domestic steel than pay that tariff. In the long term that can boost American jobs and make the United States less reliant on foreign supply chains.

However, foreign trade is very complex, and domestic suppliers cannot instantly grow, boost supply, and offer the same volume as foreign companies. In fact, if they have high enough demand from domestic buyers, U.S. businesses might raise their own prices.

And, of course, other countries may raise their own tariffs, making it more expensive for their buyers to import American goods. That can in turn hurt American businesses that sell products overseas.

There have been many studies about who ultimately benefits from tariffs. For example, a 2024 study from the National Bureau of Economic Research concluded “The trade-war has not to date provided economic help to the US heartland.” On the other hand, in 2023 Yang Zhou, an economist at Fudan University, concluded that the tariffs during President Trump’s first administration cost China far more than the United States.

Trump tariffs

Tariffs became a defining feature of U.S. trade policy during Donald Trump’s first presidency. While his higher tariffs caused controversy, most of them stayed in place during the Biden administration.

When Donald Trump returned to the presidency in 2025, he announced drastic, sweeping tariff increases. For example, in April he announced a baseline 10% for all countries.

Since then President Trump has announced many increases, pauses, and decreases in tariffs. Other countries, from China to Canada, have announced retaliatory tariff increases. Trump’s supporters argue these frequent changes are a negotiating tactic with foreign nations. Opponents argue the huge tariff swings are hurting the economy.

There is also ongoing debate over whether President Trump has exceeded his legal authority to raise some tariffs. Various laws give the president power over trade, particularly during emergencies. Trump argues the flow of fentanyl into the United States is a national emergency, for example. However, some lawsuits have argued that Trump’s sweeping tariffs across all countries are too broad and require authorization from Congress.

Canadian tariffs

One area of focus is President Trump’s tariffs on Canadian goods. On February 1, 2025 the president announced a 25% tariff on Canadian goods. Canada hit back with its own tariffs on U.S. goods.

Historically the United States has had a very friendly trade relationship with Canada, so these tariff increases took many by surprise. President Trump has also spoken frequently about Canada becoming part of the United States, which has worsened relations between the two countries.

Canadians have boycotted American goods, rejected Trump-aligned candidates, and cancelled U.S. vacations in response to Trump’s policies. These boycotts will have a negative economic impact on American businesses beyond any tariffs.

Tariff impacts on New Hampshire

According to the New Hampshire Department of Business and Economic Affairs, New Hampshire exported over $7 billion of goods in 2024. As of March 2025, the top five export markets (in descending order) were Germany, Canada, Mexico, Netherlands, and Japan. The Office of the U.S. Trade Representative estimates that exports account for over 6% of New Hampshire’s GDP and support over 23,000 jobs.

Imports also make up a significant part of New Hampshire’s economy. According to a report from the Canadian Consul General, New Hampshire imports close to $2 billion in goods from Canada each year; roughly one-quarter of those imports are energy. The New England-Canada Business Council reports that over 80% of New England’s gasoline and diesel comes from Canada.

All of that means foreign tariffs – particularly Canadian tariffs – could have a big impact on New Hampshire’s economy. With so many trade conversations in flux, however, it’s hard to predict what the final impacts will be.