China and the European Union announced new trade barriers on Wednesday in direct response to President Donald Trump’s steep tariffs, which, according to Reuters, have triggered a global trade war and bolstered the likelihood of a recession.
The president continues to downplay the market’s volatility, describing the tariffs as “permanent” but also claiming that his administration is pressuring other leaders to ask for negotiations.
“BE COOL! Everything is going to work out well. The USA will be bigger and better than ever before!” he wrote on social media.
But what, exactly, is a tariff?
More: Trump threatens China with additional 50% tariff as markets struggle: Live updates
A tariff is a form of tax imposed on imports from another country and economists generally agree that trade barriers raise consumer prices and negatively impact economic output and income, according to the Tax Foundation, a nonpartisan tax policy nonprofit.
Tariffs create more demand for domestic manufacturers, but those companies are also part of the global supply chain impacted by taxation, experts have previously explained to USA TODAY.
Worries that tit-for-tat tariffs will boost inflation and push the global economy into recession have sparked stock market sell-offs around the globe.
U.S. stocks are coming off their worst week since 2020, and the S&P 500 joined the Nasdaq in a bear market defined as at least 20% below its recent peak.
JP Morgan Chase CEO Jamie Dimon said Monday that tariffs “will likely increase inflation and are causing many to consider a greater possibility of a recession.” In a letter to shareholders of the nation’s largest bank, Dimon described the financial landscape as “unsettling” but said the U.S. economy has shown resiliency “at least until recently.”
He also said that US consumers are still spending, and businesses remain mostly healthy. He also acknowledged Trump’s recurring criticism of the federal deficit.
“It is important to note that the economy has been fueled by large amounts of government deficit spending and past stimulus,” Dimon said.
Contributing: Medora Lee, John Bacon, Francesca Chambers, Joey Garrison, Savannah Kuchar, Andrea Riquier and Kinsey Crowley, USA TODAY and Reuters
Gabe Hauari is a national trending news reporter at USA TODAY. You can follow him on X @GabeHauari or email him at Gdhauari@gannett.com.
This article originally appeared on USA TODAY: What are tariffs? How they are affecting the stock market