How do countries buy and sell?
The nutshell
Countries buy and sell goods and services with each other. Buying from abroad is called importing, and selling abroad is called exporting. A tariff is a tax a country puts on goods brought in from another country.
Every fact on this page comes from official trade guides and non-partisan explainers. Each source tag — like IfG — opens where a fact comes from.
The basics
What trade means
No country makes everything it needs. Trade is when countries buy and sell things with each other. These things are goods, like cars and food, and services, like insurance and travel. Buying from abroad is called importing. Selling abroad is called exporting.
How much the UK trades
The UK trades a lot. In 2025 it sold about £931 billion of goods and services to other countries and bought about £970 billion.HoC The European Union was its biggest trading partner, and the United States came next.
What a tariff is
A tariff is a tax a country puts on goods brought in from abroad. The importer usually pays it, and in the UK that tax goes to HMRC.IfG A tariff makes a foreign good cost more, so shoppers may buy one made at home instead.
The rules countries follow
Most countries follow shared trade rules set by the World Trade Organization, orWTO.IfG Countries can also sign a free trade agreement, a deal that lowers or removes tariffs between the two countries.
- A tariff can protect home industries by making goods from abroad cost more than goods made at home, according to the Institute for Government
- A tariff raises money for the government, because the tax is paid when goods enter the country
- The threat of a tariff can be used to press another country to change its own trade rules
- A tariff can raise prices in the shops, because the importer usually adds the extra cost to what shoppers pay
- Another country may answer a tariff with a tariff of its own, which can lead to a trade war
- A home industry shielded by tariffs may face less pressure to keep prices low or to improve
The deep end6 min
Imports, exports and the trade balance
In 2025 the UK exported about £931 billion of goods and services and imported about £970 billion, so it bought more from abroad than it sold.HoCThe gap is called a trade deficit. The Commons Library records a large deficit on goods, partly offset by a surplus on services, where the UK sells more than it buys.
How a tariff works, and who pays
A tariff is a tax charged on goods imported from another country. The importer usually pays it, collected in the UK by HMRC, and tariffs are used mainly to protect home industries by making imported goods more expensive.IfG The rate on any product is set out in the UK's official Trade Tariff, which a business checks before paying the tax on a customs form.GOV
The rules of world trade
The World Trade Organization deals with the rules of trade between countries. Under its most-favoured-nation rule, a member normally charges every other member the same tariff on the same goods, unless a free trade agreement allows a lower rate.IfG This is why a trade deal between two countries can cut tariffs that both would otherwise charge.
The argument about tariffs
Supporters of tariffs argue that a tax on imports protects home industries and local jobs, and that it raises money for the government. The Institute for Government notes that tariffs today are used mainly to shield home industries from foreign competition.IfG
Critics argue that tariffs push up prices for shoppers, because the extra cost is often passed on, and that a tariff can trigger a trade war if another country hits back with tariffs of its own. Whether a tariff helps or harms depends on the good, the country and how others respond, and figures on any one case should trace to a named source.