tariffs

Tariffs are taxes on imported goods, and they have moved to the center of US trade policy in ways that directly affect equity markets and corporate earnings. Duties on imports from Canada, Mexico, and China have triggered market volatility and forced investors to reconsider portfolio allocations.

This guide breaks down what tariffs are, how they work, and what advisors need to know right now. Keep reading for the latest tariff news and updates from InvestmentNews.

What are tariffs?

Tariffs are duties or taxes imposed on goods imported into a country. When products enter a national market from abroad, governments may apply tariffs to those imports. Tariffs function as a form of indirect tax because they increase the price of foreign goods sold within the domestic market.

Governments often use tariffs or import duties as tools of trade policy and economic strategy. Policymakers may impose duties to influence trade relationships, respond to international economic disputes, or support domestic industries competing with foreign producers.

In recent years, duties have played a central role in US trade policy under President Donald Trump. The administration's America First trade strategy emphasized import duties as a way to address trade deficits, promote domestic manufacturing, and negotiate with trading partners.

Tariffs have also been applied to specific products entering the United States. These include industrial and manufactured goods such as steel, aluminum, automobiles, semiconductors, and copper.

For financial professionals and RIAs, import duties matter because trade policy can affect global supply chains, corporate costs, and market stability. Changes in duties can alter the price of imported inputs and finished goods, which in turn may affect the profitability of companies held in client portfolios.

What were Trump's tariffs?

President Donald Trump used tariffs as a central component of his America First Trade Policy. The administration treated import duties as policy tools that could support trade strategy, national security, and economic goals.

In February 2025, the White House announced additional duties on several major US trading partners. The policy imposed 25 percent duties on imports from Canada and Mexico and 10 percent on imports from China.

The administration stated that the duties were part of a response to a national emergency related to illegal immigration and the flow of illicit drugs such as fentanyl into the United States. The policy was later adjusted following negotiations, and some duties were reduced or delayed.

In addition to country-specific duties, the administration imposed or proposed import duties on several categories of imported products. These measures included duties on steel, aluminum, copper, automobiles, semiconductors, and other manufactured goods.

Reciprocal tariffs and trade investigations

The Trump administration used several legal authorities to impose or investigate import duties. One of these authorities was the International Emergency Economic Powers Act (IEEPA). Import duties imposed using IEEPA were subject to legal challenges. In 2025, the US Supreme Court ruled against the use of IEEPA for imposing reciprocal duties, limiting the administration's ability to apply this authority to trade policy.

Afterwards, the administration used Section 122 of the Trade Act of 1974 to levy a 10 percent tariff on imports from nearly all countries beginning February 24, 2026. The measure was scheduled to remain in effect for up to 150 days while the administration conducted investigations into global trade practices.

The administration also relied on Section 232 national security duties, which were used to apply duties to products such as steel, aluminum, automobiles, and other goods. In addition, the government launched Section 301 investigations to examine trade practices in several trading partners. These investigations are mechanisms used by the United States Trade Representative to identify foreign trade practices that may harm US commerce.

Are tariffs worse than taxes?

Tariffs are not necessarily worse than other forms of taxation, but they operate differently. Unlike domestic taxes that apply broadly across an economy, duties apply only to goods imported from other countries. This makes them a more targeted tool of trade policy.

Because import duties raise the cost of imported goods, they can affect supply chains, corporate costs, and prices in sectors that depend on global trade. At the same time, duties may benefit domestic producers by making foreign competitors' products less competitive on price.

For this reason, duties are generally viewed less as a substitute for traditional taxes and more as a policy tool used to influence trade behavior, protect certain industries, or pursue national economic goals.

Kinds of tariffs

In addition to broad tariffs on imports, the United States has imposed import duties on specific industries and products. Many of these measures were implemented using Section 232 national security authorities or Section 301 trade investigations.

Import duties by product

The rates applied to specific industries vary depending on the product category. Examples from the policies described in the materials include:

Steel and aluminum imports: import duties reaching 50 percent in many cases

• Automobiles and automobile parts: 25 percent on most foreign-made vehicles and parts
• Semiconductors: 25 percent on certain computer chips beginning in January 2026
• Copper imports: 50 percent on copper imports
• Medium- and heavy-duty trucks: 25 percent on trucks and related parts

These duties apply alongside broader trade measures and investigations that may result in additional duties in the future.

Exemptions to import duties

Not all imported goods are subject to duties. Certain exemptions remain in place depending on trade agreements, policy decisions, or supply concerns.

Examples of exemptions include goods covered by the United States–Mexico–Canada Agreement (USMCA). These imports can enter the United States without the additional duties applied to other goods. Other trade agreements may include similar provisions.

In some cases, food products and agricultural goods have been exempted due to domestic shortages. Certain categories of imports such as critical minerals, metals, pharmaceuticals, and some food products may receive exemptions when domestic supplies are limited or when the government considers the products essential.

Can tariffs cause inflation?

Import duties increase the cost of imported goods entering the United States. Because duties are imposed on imports, companies that bring foreign products into the country must pay the additional charges. These costs may be passed on to consumers through higher prices.

Many manufacturers rely on imported materials, components, or finished goods as part of their supply chains. When duties raise the price of those imports, companies must decide whether to absorb the added cost, pass it to customers, or find alternative suppliers. If higher costs are passed through to consumers, the result can be higher prices across the economy, which contributes to inflation.

Impact on equity markets and sector performance

Import duties do not directly determine stock prices. However, they can influence corporate profitability, supply chains, and investor expectations. Because duties increase the cost of imported goods, they can reduce profit margins for companies that rely on global supply chains.

In many cases, equity markets react to tariff announcements before the economic effects appear in corporate financial results. Investors often adjust expectations for earnings growth, inflation, and geopolitical risk when trade policy changes. Market volatility can follow as participants revise their outlooks and reposition portfolios.

Sectors most exposed

Industries that depend heavily on global supply chains are typically the most exposed to tariff changes. Several sectors frequently appear at the center of tariff policy discussions:

• Manufacturing companies often rely on imported raw materials and intermediate components. Duties on these inputs can increase production costs and reduce profit margins if firms cannot fully pass those costs to customers.
• The automotive sector is also sensitive to import duties. Vehicle manufacturing involves complex international supply chains, with components sourced from multiple countries. Duties on automobiles or automobile parts can affect both foreign and domestic producers operating within the United States.
• Metals and mining industries are another area of exposure. Duties on steel, aluminum, and other industrial metals can alter global supply dynamics and affect prices for producers and downstream manufacturers who use these materials.
• Semiconductor and technology supply chains may also experience tariff-related pressures. Technology manufacturing often relies on specialized components produced across multiple countries.

Sector risks and potential opportunities

Import duties can create both risks and opportunities depending on a company's position within the supply chain. Firms that rely heavily on imported materials may experience higher input costs. At the same time, companies that produce goods domestically may benefit from tariffs that make imported alternatives more expensive.

In some cases, duties can encourage production to shift toward domestic suppliers. This may benefit firms that produce goods within the United States or companies with supply chains less dependent on foreign inputs.

For financial professionals and RIAs, sector exposure to import duties is an important factor in equity analysis. Evaluating which industries rely most on global supply chains can help advisors understand which holdings may experience tariff-related headwinds or tailwinds.

Duty changes for long-term investors

For investors and advisors, developments show that policy can change as economic priorities, and international negotiations evolve. Import duties can influence corporate costs, supply chains, and global trade flows, all of which can affect portfolio performance over time.

Because import decisions often unfold through negotiations, legislation, and court rulings, the path of trade policy can remain fluid. Financial professionals and RIAs must therefore monitor tariff developments as part of broader portfolio management and risk assessment.

Changes in policy can influence inflation expectations, corporate earnings, and supply chain dynamics.

Read the latest news on tariffs from InvestmentNews!