President Donald Trump is set to impose sweeping tariffs on goods imported from Canada, Mexico and China on Tuesday, in a move that experts warned could end up driving up the cost of everyday goods in the U.S. and weighing on American consumers.
On Monday, Trump said there was “no room left” for a deal that would avoid or postpone the tariffs on Canada and Mexico. The president framed the tariffs as a response to the two countries allowing fentanyl to flow through their borders into the U.S. “at very high and unacceptable levels,” though he admitted that “a large percentage” of the drugs were made in China.
Tariffs Explained
The tariffs expected to come into effect on Tuesday will add a 25 percent fee on all products coming from Canada and Mexico, and an additional 10 percent on goods coming from China.
China was already hit by a 10 percent tariff on February 4, to which the country retaliated by imposing its own tariffs on some U.S. products, including a 15 percent border tax on coal and liquefied natural gas products and10 percent tariffs on crude oil, agricultural machinery and large-engine cars.
Both Canada and China have promised to retaliate against the Trump administration’s new tariffs, while Mexico expressed hope until Monday that a deal could be reached to avert the new fees. The tariffs are widely expected to start tit-for-tat trade wars with some of the U.S. biggest trade partners, with American consumers being caught in the crosshairs.
“The prospect of significant tariffs on our allies has resulted in withholding investments [and] preemptive price increases that are going to be borne by small businesses and, ultimately, by consumers,” Bharat Ramamurti, former deputy director of Biden’s National Economic Council, said in a statement shared with Newsweek.
“It’s really been—across the board—an economic agenda that is perfectly suited to the opposite of what the American people want, which is lower costs and more predictability.”
What Are the Products That Could Go Up in Price?
- Cars: New cars and trucks are expected to become more expensive as a result of tariffs on Canada and Mexico, where part of the manufacturing process is made.
- Beer: Mexican beer like Modelo and Corona, which are popular in the U.S., are likely to increase in price for American customers, unless firms decide to import less to avoid higher costs.
- Houses: About a third of softwood lumber, a crucial material to build new houses, is imported from Canada to the U.S. every year. Several housing experts have warned that tariffs on the U.S. neighbor will inevitably drive up the cost of building new homes and discourage new construction, eventually exacerbating the current supply shortage and increasing housing costs.
- Fuel: Fuel prices in the U.S. could increase as a result of a 10 percent tariff on Canada’s energy imports. The country is America’s largest foreign supplier of crude oil, with 61 percent of oil imported into the U.S. between January and November 2024 coming from Canada.
- Avocados, maple syrup: Some food products popular in the U.S. but traditionally manufactured or grown in Canada and Mexico are also likely to see higher price tags as a result of tariffs. Nearly 90 percent of avocados in the U.S. market currently come from Mexico. Tomatoes, peppers, and tequila, mainly produced in Mexico, are also likely to become more expensive.
- Personal electronics: Computers, TVs, smartphones and tablets are likely to become more expensive because they are mostly manufactured in China, or use components made there.
Investors Are Spooked
Trump’s announcement on Monday that tariffs on Canada, Mexico and China were to go ahead sent investors in a panic and stock markets tumbling. The S&P 500 plunged 1.8 percent on Monday, the steepest one-day drop so far this year.
“The market finally took the Trump administration at its word, and the realization that the tariff talk wasn’t just a negotiating tactic is starting to sink in,” Chris Zaccarelli, chief investment officer for Northlight Asset Management, said in a statement shared with Newsweek.
“The selloff that we are beginning to see has room to run—to the downside—as long as the tariff threats remain more than idle talk. Last month’s reprieve was just a temporary break in the downward trend, because a trade war is something the market didn’t believe was possible, so as one—or many—start to unfold, the market will begin pricing in the inevitable damage that will be done to our economy,” he said.
What Happens Next
The impact of Trump’s tariffs is expected to be felt on American consumers as well as on the global economy. Countries like Canada and Mexico, whose economies are intertwined with the U.S. and rely heavily on trade with their powerful neighbor, are expected to suffer dramatically from the new policies.
The U.S. is expected to suffer as well. The Washington-based think tank Tax Foundation estimated that the imposed tariffs on China would reduce long-run GDP by 0.1 percent, while the proposed tariffs on Canada and Mexico would shrink it by 0.3 percent. That does not account for foreign retaliation.
Read the full article here
