Here’s how tariffs would make products more expensive
Tariffs will be a big part of the Trump administration’s trade policy. So, what are they and how do they work?
WASHINGTON – President-elect Donald Trump has threatened U.S. trade partners with steep tariffs, prompting backlash and anxiety about higher prices for American consumers.
Trump on Monday vowed to sign an executive order when he takes office in January implementing a 25% tariff − essentially a tax or fee − on all imported goods from Mexico and Canada, and a 10% tariff against China.
“This Tariff will remain in effect until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop this Invasion of our Country!” Trump wrote in a post on Truth Social, calling out America’s bordering countries. “Both Mexico and Canada have the absolute right and power to easily solve this long simmering problem.”
In a second post, Trump said tariffs on Chinese goods are also an effort to curb “the massive amounts of drugs, in particular Fentanyl, being sent into the United States.”
Tariffs were a central piece of Trump’s economic agenda while campaigning for president in 2024, promising what he called a domestic “manufacturing renaissance.” Yet economists have warned his plan could also lead to higher inflation and interest rates.
Here’s what to know about the proposed tariffs, potential price effects and which goods could be most impacted.
How do tariffs work?
The idea behind tariffs is to drive up the price of imported goods, encouraging U.S. companies and consumers to opt for American-made products.
Trump waged trade threats in his first administration, too, escalating trade tensions with China by placing tariffs on billions of dollars of Chinese-made goods. President Joe Biden kept many of these fees in place and added tariffs on other Chinese imports, including electric vehicles and semiconductors.
Now returning to the White House, Trump is promising even more aggressive tariffs against multiple countries.
But it won’t be China, Mexico, Canada or other countries directly footing the bill.
Importers pay the extra costs to buy those international goods, then typically pass the burden on to consumers in the form of raised prices. Meaning, Americans could expect to start paying more at the grocery store, department store and elsewhere.
The Peterson Institute for International Economics, a nonpartisan think tank, reported in August that the average American household may end up spending an additional $2,600 or more a year.
What does the US import from Mexico and Canada? What could cost more?
Trump’s proposed tariffs could impact the price tag for a variety of products.
Oil is the top import from Canada to the U.S., according to the U.S. Energy Information Administration. The U.S. also imports billions worth of wood and paper from its northern neighbor, which if slapped with a 25% tariff could have wide-ranging effects on products such as printed books and industries like housing construction.
Electronics are among the bulk of goods sent from China to U.S. each year. Other popular Chinese-made imports include textiles, furniture and toys
Recently, Mexico became America’s No. 1 exporter, shipping around $475 billion in goods to the U.S. in 2023.
Cars and components for cars are the top category of goods coming from Mexico. And while manufactured products make up the lion’s share of Mexican imports, food prices in the U.S. may also be in for a spike, as agricultural goods accounted for around $20 billion in American purchases from Mexico last year − including avocados from Mexico.
How are China, Mexico and Canada responding?
Officials in China, Mexico and Canada are pushing back on Trump’s tariff threats.
Mexico’s president, Claudia Sheinbaum Pardo, warned in a news conference Tuesday that the American president-elect’s approach could have ramifications for both country’s economies.
“The response to one tariff will be another, until we put at risk companies that we share – yes, that we share,” Sheinbaum said.
Likewise, Doug Ford, the head of government in Canada’s most populous province, Ontario, said Trump’s tariffs, “would be devastating to workers and jobs in both Canada and the U.S.”
And a spokesperson for the Chinese embassy in Washington said in a post on X Monday, “No one will win a trade war or a tariff war.”
Contributing: Kim Hjelmgaard, Bailey Schulz, Michael Collins, Lauren Villagran
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Publish date : 2024-11-26 02:47:00
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