What is a tariff? Heres what to know as the U.S. and Canada face a trade war [Video]

A trade war between Canada and its largest trading partner has begun, with tariffs imposed by U.S. President Donald Trump now in effect and Prime Minister Justin Trudeau responding with a package of retaliatory tariffs.

Stocks are tumbling, businesses are warning of impending layoffs and further measures from both countries are likely in the coming days.

What does this all mean for you? Here’s a look at some of the key questions.

What is a tariff?

Tariffs are a tax on imported goods. Like other taxes, they’re generally used by governments to help meet policy objectives and raise revenue.

The main goal of tariffs is usually to help boost and protect domestic producers by raising costs for importers. The trade-off is that those costs are often passed on to consumers.

Free-trade agreements generally either lower or remove tariffs between the member countries. But sometimes it doesn’t work out that way.

The president’s executive order hitting Canada and Mexico with 25 per cent across-the-board tariffs, with a lower 10 per cent …