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President-elect Donald Trump’s vow to impose steep tariffs on America’s biggest trading partners, Mexico and Canada, could ultimately backfire and hurt Americans too, impacting the prices of everyday products like gasoline and guacamoles.
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Trump’s threat to impose tariffs is part of his broader effort to pressure Mexico and Canada to do more to stop the flow of illegal drugs and immigrants into the United States. In social media posts on Monday, Trump vowed to impose a 25% tax on all imports from Mexico and Canada, as well as an additional 10% tax on imports from China, as one of his first orders on taking office.
If Trump makes good on his threat, the impact would be felt across the U.S. economy, from the supermarket to the car dealership. Here are three things to know about Trump’s tariff proposal.
Tariffs may be targeted at others, but Americans would also feel the impact
President-elect Trump’s tariffs are intended to pressure Canada and Mexico on border policy, as well as to hit China economically. However, critics argue that if the threatened tariffs take effect, it’s U.S. customers and businesses that would end up footing the bill.
In a high-profile example, the tariffs would raise the price of avocados, a staple of many American households, less than three weeks before the Super Bowl, one of the biggest guacamole-eating days of the year. Shoppers would see higher prices throughout the produce department, as Mexico and Canada supply 32% of the fresh fruit and 34% of the fresh vegetables sold in the U.S.
“One of President-elect Trump’s signature pledges during the campaign was to tamp down inflation and to reduce prices at the grocery store,” says Lance Jungmeyer, president of the Fresh Produce Association of the Americas, an importers trade group. “You would see an immediate spike in prices at the grocery store, and restaurants would change their menus to reduce the amount of produce used or raise prices.”
Trump’s proposed tariff would also likely increase gasoline prices, especially in the Midwest, where Canada supplies much of the crude oil used in U.S. refineries.
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American companies could suffer too
It wouldn’t just be American consumers feeling the impact. Businesses that operate across borders would suffer as well. “I don’t think people quite grasp just how integrated the North American supply chain is,” says Scott Lincicome, a trade expert at the libertarian CATO Institute.
A key example is the U.S. auto industry, which has grown up under the North American Free Trade Agreement and the successor treaty that Trump signed in 2020. “These days, certain automotive parts like a car seat can travel across international borders five or six times before finally ending up in a made-in-America automobile,” Lincicome adds. “That type of seamless trade would be utterly jeopardized by a 25% tariff, thus harming a lot of American manufacturers and manufacturing workers.”
But will Trump actually follow through? That’s still unclear
Under the law, the president has broad authority to impose tariffs. Trump did slap taxes on many imports during his first term in the White House, typically after going through a lengthy review by the Commerce Department or by the U.S. Trade Representative.
However, Trump also threatened to impose many more tariffs than he actually did. “Donald Trump was willing to tweet out tariff threats, usually in the evening, after watching Fox news, and those tweets typically didn’t come to much of anything,” Lincicome says.
The muted reaction in financial markets on Tuesday suggests many investors are discounting the likelihood that the threatened tariffs will take effect.
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Canadian Prime Minister Justin Trudeau says he’s already spoken to Trump by telephone, while Mexico’s President Claudia Sheinbaum sent a letter to the president-elect. Both foreign leaders have called for cooperation and dialogue.
Whether that results in any meaningful drop in the volume of drugs or immigrants crossing the border remains to be seen. A spokesman for China’s government cautioned, “No one will win in a trade war.”
But China may already be winning this first round. The additional 10% tariff on imports from China that Trump threatened on Monday is a fraction of the 60% levy he called for during the campaign.
