A tariff is a tax applied to goods imported from other countries. It’s usually charged at the border before those goods are allowed into the domestic market.
When one country imposes new tariffs, another country might respond with its own set of tariffs. These are known as retaliatory tariffs. They are often used as a countermeasure when a country feels that its exports are being unfairly targeted. This kind of back-and-forth can occur when trade negotiations break down or when a government takes a more assertive position on trade policy.
What Is the Purpose of a Retaliatory Tariff?
A retaliatory tariff is used to respond when another country raises its tariffs. The goal is to put pressure on that country to lower or remove those trade barriers.
It also helps support local industries that are hurt by the first country’s actions. By making imported goods more expensive, it gives local businesses a better chance to compete.
For example, if one country adds a tariff on clothing, the other might reply with a tariff on machinery. This kind of move can encourage both sides to return to the table and work out a new trade deal.
Who Pays Retaliatory Tariffs?
Retaliatory tariffs aren’t paid by the country being targeted—they’re paid by the importer bringing goods into the country.
Usually, this means a local business pays the tariff when the goods arrive at the border depending on the agreement between buyer and seller know as the Incoterms.
To cover the expense, importers often raise prices for wholesalers and retailers, who then pass the cost on to shoppers. That’s why everyday consumers end up paying more, even though the tariff isn’t directly aimed at them.
If prices get too high, some products might be pulled from shelves. Other times, businesses look for cheaper suppliers or try to cut costs elsewhere.
TIP: Also read Who Ultimately Pays the Tariff?
Trump’s 2025 Tariff Plan: What Changed?
In April 2025, former President Donald Trump introduced a new tariff plan called “Liberation Day.” The policy includes a 10% tariff on all imported goods, with higher rates applied to certain countries that have higher tariffs on U.S. products.
Supporters of the plan say it aims to boost domestic manufacturing and strengthen the U.S. workforce.
At the same time, some economists have raised questions about its potential effects, citing increased costs for businesses and consumers, which may lead to responses from trade partners through “retaliatory tariffs”.
Why Trump Says These Tariffs Are Needed
The Trump administration cites:
- A $1.2 trillion trade deficit in 2024
- Longstanding foreign VAT taxes, tariff imbalances, and non-tariff barriers
- Loss of 5 million+ manufacturing jobs since 1997
- National security risks tied to supply chain dependence
Examples of Retaliatory Tariffs
European Union and US Steel Tariffs (2025)
The US added tariffs on steel and aluminium from the EU. In return the EU set tariffs on American goods like motorcycles, textiles, bourbon and more. This was meant to push back on what they saw as unfair treatment.
Source: NPR
India and the US Trade Dispute 2019
In 2019 the US removed India’s special trade status and raised tariffs on Indian steel and aluminium. India responded with tariffs on US goods including almonds and other exports.
Source: Peterson Institute for International Economics
US and China in 2018
In 2018 the US raised tariffs on goods from China. China responded with tariffs on American products like soybeans cars, pork and planes. This was part of a long trade standoff between the two countries.
Source: CNN Business
Retaliatory Tariff vs Reciprocal Tariff
Reciprocal tariffs are not a reaction to a new tax. They are used to match the other country’s existing rates.
If one country already charges a high tariff on imports, the other side can raise its own rates to the same level. It is about balance. Not about hitting back.
For example, if the EU charges a 10 percent tariff on US cars but the US only charges 2.5 percent on EU cars, the US might raise its tariff to match. That is a reciprocal tariff.
What About Countervailing Tariffs?
Countervailing tariffs are used to deal with unfair trade support. They come in when one country proves that another is giving subsidies to help its own exporters.
These subsidies can make goods cheaper than they should be. That puts other producers at a disadvantage.
A countervailing tariff adds a tax to balance the price. It is not the same as a retaliatory tariff. But it still protects local industries from unfair trade
Final Thoughts
In 2025 the full impact of Trump’s new tariffs is still taking shape. Some industries have welcomed the change. Others are bracing for higher costs and new trade hurdles.
What’s clear is that tariffs are now front and centre in US trade policy. They are not just a short-term move.
While this article provides a high level overview of updates, it is essential for stakeholders to seek the most accurate and up to date information directly from the US Customs and Border Protection (CBP). Regulations and enforcement measures can evolve, and CBP remains the authoritative source for compliance details. For official guidance, visit the CBP website.
