On Saturday, President Donald Trump followed through on his promise to impose significant tariffs on the U.S.’s three largest trading partners — Canada, China, and Mexico — citing a national emergency due to the flow of fentanyl and undocumented immigrants into the U.S.
The new tariffs, which are expected to take effect on Tuesday, include a 25% duty on all imports from Mexico and most goods from Canada (with a 10% exemption for energy-related products), as well as a 10% tariff on Chinese goods entering the U.S.
Trump has consistently advocated for tariffs to achieve three main objectives: raising revenue, balancing trade, and pressuring other countries into negotiations.
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However, economists warn that these tariffs could negatively affect U.S. businesses and consumers, many of whom are still dealing with the aftereffects of recent inflation.
The U.S. Chamber of Commerce cautioned that these tariffs won’t resolve the long-standing border issues and could disrupt supply chains, leading to higher prices for American consumers.
Economic experts like Sung Won Sohn also argued that tariffs act like an “economic war,” where everyone loses, and they expressed hope that the pain from these policies might eventually lead to better outcomes.
The three countries targeted by the tariffs represent about one-third of U.S. imports, including essential goods such as fruits, vegetables, meat, gas, cars, electronics, clothing, and more.
Food
Mexico and Canada are major suppliers of food products to the U.S., with Mexico being the top provider of fruits and vegetables and Canada leading in grain, livestock, poultry, and meats. The tariffs could significantly increase food prices, especially since grocery retailers typically have thin profit margins and may pass these costs on to consumers. With U.S. reliance on imports growing faster than exports in recent years, especially due to climate change, food prices could rise, particularly for fresh fruits, vegetables, and avocados.
Fuel and Energy
The U.S. imports significant quantities of oil and gas from Canada. While the tariff on Canadian energy products is only 10%, this could still affect gasoline prices, especially if the tariffs remain in place through the summer. The impact will likely be felt most in the Midwest, where much of the Canadian oil is sent.
Cars and Car Parts
The U.S. imports billions of dollars’ worth of motor vehicles and parts from Mexico and Canada. A 25% tariff would significantly raise production costs for U.S. car manufacturers, who rely on Mexico for lower wages and production costs. These higher costs may be difficult to offset, given the substantial investments in existing manufacturing plants.
Steel
Canada and Mexico are key exporters of steel to the U.S., and the new tariffs could raise prices for industries dependent on steel, such as automotive manufacturing and construction. Previous tariffs on steel in 2018 already led to price increases, a trend that may continue.
Beer and Alcohol
Mexico is a major supplier of beer and liquor to the U.S., including popular brands like Modelo and tequila. Tariffs on these products could result in price hikes for consumers, particularly for major alcohol brands. The U.S. beer and spirits industries are also concerned about potential retaliatory tariffs from Mexico.
Home Construction and Furniture
The U.S. imports a significant portion of its softwood lumber and other construction materials from Canada and Mexico. Tariffs on these products could increase the cost of home construction, worsening the housing affordability crisis. Other materials, like gypsum and lime used for drywall, are also imported in large quantities from Mexico.
Electronics, Toys, and Appliances
The U.S. relies heavily on China for consumer electronics, toys, and footwear. With China being a leading supplier of these goods, tariffs could significantly impact prices for products like smartphones, TVs, and toys, as well as athletic equipment and shoes.