Trade and tariffs

The basics

A tariff is a tax on imported goods¹. Importers declare their goods, and U.S. Customs and Border Protection collects the tariff¹. Businesses may absorb that cost or pass some of it on to their customers.

The Constitution gives Congress the power to lay taxes and duties². Congress has handed part of that power to the President through trade laws, such as Section 232, which allows tariffs on imports that threaten national security¹.

In 2025, the President imposed broad tariffs under the International Emergency Economic Powers Act (IEEPA)⁴. On February 20, 2026, the Supreme Court ruled 6 to 3 that IEEPA does not authorize tariffs⁴. The administration then imposed a temporary 10% tariff under Section 122 of the Trade Act of 1974, which is limited to 150 days⁵. In May 2026, the Court of International Trade ruled that tariff exceeded the President's authority, but its order covered only the importers that sued, and the government appealed⁵.

When that tariff expired on July 24, 2026, new tariffs under Section 301 of the Trade Act of 1974 took effect: generally 10% or 12.5% on imports from 60 trading partners that supply about 99.4% of U.S. imports, with many exceptions³. The administration based them on findings that those trading partners do not effectively ban imports made with forced labor, and lawsuits challenging them were filed right away³. Goods already covered by Section 232 tariffs, such as steel, aluminum and cars, are excluded, as are qualifying goods from Canada and Mexico under the USMCA trade agreement³.

On July 1, 2026, at the agreement's scheduled review, the United States declined to renew the U.S.-Mexico-Canada Agreement (USMCA) in its current form⁶. The agreement stays in force while the issues are worked out, and it now faces a review every year⁶⁹. In February 2026, before the Supreme Court ruling, CBO estimated that higher tariffs would reduce federal deficits by $3.0 trillion over ten years⁷. In August 2026, after the ruling and the tariff changes that followed, CBO estimated that trade policy changes through July 31 would make deficits $0.9 trillion larger over 2027 to 2036 than in that February projection¹⁰.

Key terms

Tariff

A tax on imported goods, collected by U.S. Customs and Border Protection from the importer¹.

Trade deficit

When a country buys more from other countries than it sells to them.

Section 232 and Section 301

Trade laws that let the President impose tariffs, for national security under Section 232¹, or in response to other countries' trade practices under Section 301³.

USMCA

The trade agreement among the United States, Mexico and Canada that replaced NAFTA. The U.S. declined to renew it in its current form in July 2026, but it remains in force and is now reviewed every year⁶⁹.

Retaliation

When other countries respond to U.S. tariffs with tariffs of their own on American exports.

In Texas

Texas was the largest exporting state in 2025, shipping $450.3 billion in goods abroad⁸. Texas goods exports supported an estimated 1.1 million jobs in 2023⁸.

Mexico is Texas's biggest customer by far, buying $125.2 billion in Texas goods in 2025, or 28% of the state's goods exports, followed by Canada at $34.6 billion⁸. Top Texas exports include computer and electronic products, petroleum and coal products, and chemicals⁸. That makes the future of the USMCA and any retaliation against U.S. goods especially important for Texas.

How people see it

The strongest case for each view, in terms its supporters would recognize. We don't pick a side.

Questions to ask a candidate

• Should Congress have to vote to approve major tariffs instead of leaving them to the President?
• Should the U.S. renew the USMCA trade deal with Mexico and Canada? What would you change?
• Which current tariffs would you keep, and which would you remove?
• How would you protect Texas exporters and farmers if other countries retaliate?