President-elect Donald Trump has pledged to expand tariffs on imports when he takes office in January. Trump said he’d add 10% more to existing tariffs on goods from China, and he recently announced a 25% tariff on goods from Mexico and Canada in order to force those countries to crack down on illegal immigration and drug trafficking into the U.S.

But what is a tariff? And what will be the economic impact of increasing them?

“Think of it like a sales tax, but it’s a sales tax only on goods that are brought into the country from other places,” MIT economist Jon Gruber told Boston Public Radio on Thursday.

If Trump acts on his latest tariff proposals, U.S. consumers would collectively pay an estimated $1.2 trillion more in taxes over the next decade in the form of higher prices, he said. But like any economic tool, tariffs come with both costs and benefits.

An argument for tariffs

Tariffs can have three benefits, Gruber said.

The first is to punish bad trade partners, like China, which has violated the rules of the World Trade Organization and stolen trade secrets. The second is as a negotiating tool. In the case of the proposed tariffs on Mexico and Canada, the goal would be to stop migrants and the import of illegal drugs like fentanyl.

The impact on China may be limited, because the U.S. is only a small part of China’s global trade, Gruber said. But Canada and Mexico will feel the impact of tariffs more severely because of free trade agreements with the U.S.

Imposing tariffs on the United States’ North American neighbors could also open up larger geopolitical issues. In 2020, Trump signed the United States-Mexico-Canada Agreement, which was similar to the existing North America Free Trade Agreement (NAFTA) but with additional protections and restrictions.

“What do we do about … a president who signed a treaty, then backing off it a number of years later? What does that do to our standing in the world?” Gruber said.

The third benefit of tariffs is to promote domestic manufacturing activity: Gruber said the idea is that imposing taxes on imports where the U.S. has a large manufacturing presence could create more domestic manufacturing jobs.

This is one of the arguments for tariffs that Trump has repeatedly touted. During his first term, he imposed tariffs on selected goods like washing machines and solar panels, and expanded tariffs to 1,300 goods from China. And the tariffs encouraged foreign companies to shift more manufacturing to the U.S.; they ultimately created about 1,800 new jobs, according to a 2019 report from economists at the University of Chicago and the Federal Reserve.

The cost of tariffs

Those tariffs did generate about $80 billion in revenue, Gruber said. Yet during that time, the price of washing machines rose by 12% — and so did the price of clothes dryers, which did not have a direct tariff. In total, tariffs cost consumers $1.5 billion in 2018, according to the 2019 report.

While the revenue from the tariffs did not offset costs to consumers, Gruber said it’s a legitimate argument for increasing domestic production.

“There is a growing consensus that economic nationalism is something worth taking seriously, in particular for sectors where we are very vulnerable to supply chains and where we have concerns that other countries might not trade fairly,” he said.

Gruber said he thinks Trump will follow through with additional China tariffs, but said he views the Canada-Mexico tariffs as more of a political move that could backfire and destroy productive trading relationships.

“I believe it’s more of a negotiating tool so that he can point to actions they’re taking to reduce migration,” he said. The problem, he added, is that Mexico and Canada could impose their own tariffs in return.

“It becomes a tit for tat, which is destructive for everyone,” Gruber said.

Produced with assistance from the  Public Media Journalists Association Editor Corps funded by the  Corporation for Public Broadcasting, a private corporation funded by the American people.