What Are Tariffs And How Do They Work

US President Donald Trump has placed 125% tariffs on goods imported from China, leading Beijing to respond with an 84% tax on American products. Trump had also brought high tariffs on dozens of other countries, but these have been suspended for 90 days. He argues that tariffs will boost US manufacturing and protect jobs, but the world economy has been thrown into chaos, and prices are expected to rise for consumers.

Tariffs are taxes charged on goods bought from other countries. Typically, they are a percentage of a product's value. The 125% tariff on Chinese goods means that a $10 product would attract a $12.50 tax on top - raising the total cost to $22.50.

The companies that bring foreign goods into the country have to pay the tax to the government. The money is collected when the imported goods clear US customs. Firms can choose to pass on some or all of the increased cost to customers.

However, China still ships everything from iPhones to children's toys to the US. Analysts have pointed out that some Chinese goods enter the US via other Southeast Asian countries, which could mean they can avoid the 125% rate.