What are tariffs and will prices rise?

Donald Trump has agreed to pause imposing tariffs on goods from Mexico and Canada, after threatening to bring them in from Tuesday.

The US president had said tariffs were needed to "protect" Americans from the "major threat of illegal aliens and deadly drugs", including fentanyl, but will now delay implementing them after calls on Monday with Canadian Prime Minister Justin Trudeau and Mexican PM Claudia Sheinbaum.

Trump told the BBC tariffs on EU goods could happen "pretty soon" - but suggested a deal could be "worked out" with the UK.

He also floated the idea of an additional 10% across-the-board tariff on all goods imported into the US.

Tariffs are taxes charged on goods imported from other countries.

Trump originally said he would impose a 25% tariff on goods shipped from Canada and Mexico. So, a product worth $4 would face an additional $1 charge applied to it.

There will be a 10% charge on goods imported from China, set to take effect on 4 February at 00:01 EDT (05:01 GMT), he said.

However, Trudeau confirmed Trump's proposed tariffs of 25% on Canadian goods - which was also set to come into effect on Tuesday - "will be paused for at least 30 days while we work together".

In a post on X, Trudeau said Canada is implementing a "$1.3bn border plan" to add "new choppers, technology and personnel to border," as well as "increased resources to stop the flow of fentanyl".

Trump confirmed the charges would be halted for 30 days to see "whether or not a final Economic deal with Canada can be structured."

The proposed tariffs against Mexico have also been delayed a month after the two countries struck a deal after a phone call between Trump and Mexican President Claudia Sheinbaum.

This type of tariff - charging a percentage of a product's value - is most common. Another type of tariff imposes a fixed figure on imports, whatever their value.

Companies that import goods from abroad pay the tariffs to the US government. However, economists say these additional costs are usually passed on to the consumer through higher prices.

Trump is fulfilling a campaign promise of introducing import duties against some of America's closest trading partners.

Trump said this will boost US manufacturing.

The tariffs will grow the US economy, protect jobs, and raise tax revenue, he argues.

Trump says he is using tariffs not just for economic reasons, but also to "combat the scourge of fentanyl", a powerful drug that causes tens of thousands of overdose deaths in the US each year.

His administration says chemicals used to make the drug come from China, while Mexican gangs supply it illegally and have fentanyl labs in Canada. Trudeau has said less than 1% of fentanyl entering the US comes from his country.

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At the same time Trump is placing economic pressure on these trading partners, he has stated a desire for Canada to join America as the 51st state, an idea Trudeau has firmly rejected.

In response to Trump's initial announcement, Trudeau declared retaliatory 25% tariffs on 155bn Canadian dollars' worth ($107bn; £86bn) of US goods on Saturday.

Following a call with Trump on Monday, he also halted the tariffs.

Mexican President Claudia Sheinbaum had earlier directed the Secretary of Economy to impose a plan including "tariff and non-tariff measures in defence of Mexico's interests".

In a statement, China's foreign ministry said in a statement that it "firmly deplores and opposes this move" and will "take necessary countermeasures".

"Trade and tariff wars have no winners," said a spokesperson at China's Washington embassy.

Together, China, Mexico and Canada accounted for more than 40% of imports into the US last year.

In Trump's previous time in office, he applied less restrictive tariffs on China.

This time around, the tariffs appear to apply to most categories of goods.

There is, however, a carve-out for Canadian energy, which will be tariffed at 10% instead of 25%, should the charge go ahead after 30 days.

Goods from Mexico such as fruit, vegetables, spirits and beer are expected to get more expensive should the tariffs ultimately take effect.

Canadian goods such as steel, lumber, grains and potatoes would also be likely to get pricier.

It is expected the car manufacturing sector could see the brunt of the effects of potential tariffs.

Vehicle parts cross the US, Mexican and Canadian borders multiple times before a vehicle is completely assembled.

The average US car price could increase by $3,000 because of the import taxes, financial analyst TD economics suggested.

On Sunday, Trump told the BBC the UK was acting "out of line", but suggested a solution for the UK could be "worked out" as he was "getting along very well" with UK Prime Minister Keir Starmer.

But, he said tariffs could be imposed on the EU "pretty soon", saying "they take almost nothing [from the US] and we take everything from them".

The UK's Business Secretary, Jonathan Reynolds, has said that he thinks the UK should be excluded from any tariffs because the US currently exports more products to the UK than it imports from the US.

"I think we've got an argument to engage with," Reynolds told the BBC.

The UK exports pharmaceutical products, cars and scientific instruments to the US.

Last year, the US had a trade deficit of $213bn with the EU - which Trump described as "an atrocity".

The EU has said it would "respond firmly" to any tariffs.

EU foreign policy chief Kaja Kallas said a trade war with the US would mean "the one laughing on the side is China", adding: "We need America, and America needs us as well."

US companies Harley Davidson, which manufactures motorcycles, and whiskey distilleries such as Jack Daniel's have previously faced tariffs from the EU.

Economists suggest that a portion of the cost of tariffs ends up being paid by consumers.

Sellers may raise the price of goods they are importing for consumers.

Economic studies of the impacts of tariffs imposed by Trump during his first term in office show the burden was ultimately borne by US consumers.

From 2018 to 2023, tariffs on imported washing machines saw the price of laundry equipment rise by 34% in the US, according to official statistics, before falling once the tariffs expired.

Some experts suggest that these new tariffs could prompt a wider trade war and exacerbate inflation.

Capitol Economics said the annual rate of inflation could increase from 2.9% to as high as 4% because of the newly announced tariffs.

If that happens, US inflation would return to the levels seen in mid-2023.