On Monday and Tuesday, President Trump announced that he would be keeping one of his key campaign promises and imposing by Feb. 1 a 25% tariff on goods from Canada and Mexico as punishment for allowing drugs and migrants to cross into the United States as well as an additional 10% tariff on goods from China to penalize the country for sending fentanyl.
Trump also threatened Wednesday to use tariffs against Russia and “other participating countries” if “we don’t make a ‘deal’ and soon,” to end the war in Ukraine.
For anyone who has followed Trump’s political career, the news probably didn’t come as much of a surprise. “I always say ‘tariffs’ is the most beautiful word to me in the dictionary,” the president repeated Monday at Washington, D.C.’s Capital One Arena.
But the impact of Trump’s new tariffs — if they’re actually implemented — could be more of a jolt.
“Tariffs are gonna make us rich as hell,” Trump claimed onstage Monday. “They’re gonna bring our country’s businesses back that left us.”
Experts, however, tend to see things differently. Here’s how Trump’s tariffs could affect you.
Two views of tariffs
Tariffs aren’t a new obsession for Trump. “I believe very strongly in tariffs,” he told journalist Diane Sawyer in 1988, nearly 20 years before his first presidential run. “America is being ripped off. We’re a debtor nation, and we have to tax, we have to tariff, we have to protect this country.”
Trump has long insisted that universal tariffs will level the proverbial playing field by incentivizing companies to retain American workers and ramp up U.S. manufacturing — all while funneling “trillions” of dollars in new revenue to the federal government. Now he’s finally planning to put his pet theory into practice.
Yet nearly all economists disagree with Trump’s take, noting that a tariff actually is an import tax paid by the company doing the importing — not by the foreign country (or foreign business) that’s sending its goods to the U.S.
The same experts have found that most importers simply pass the added cost of tariffs on to U.S. consumers by jacking up their prices— rather than going out of their way to replace the affected goods with American-made alternatives, which still tend to be more expensive. Then other countries retaliate with tariffs of their own, risking a global trade war and recession.
Rising prices?
Together, Mexico, China and Canada purchased more than $1 trillion in U.S. exports and provided nearly $1.5 trillion of goods and services to the U.S. in 2023.
With that in mind, it isn’t hard to see how life might get more expensive for Americans if, say, a 25% tariff is added every time a part, product or raw material crosses our northern or southern border.
Consider the auto industry. A single car or truck can move back and forth between the U.S. and Canada up to eight times before it’s fully assembled. The entire car seat industry is based in Mexico. Ford’s Maverick pickups, Bronco Sport SUVs and Mustang Mach-E EVs are made in Mexico too. All told, S&P Global estimates that Trump’s tariffs could cost automakers up to 17% of their annual core profits — which could translate into a $3,000 price hike for the average car, according to Kelley Blue Book.
The list goes on. Canada exports 80% of its oil to the United States; the U.S. gets half of its imported oil from Canada. As a result, analysts estimate that gas prices could rise by 25 to 75 cents per gallon under Trump’s new tariffs. Your jeans might be made with American cotton and buttons — then sewn in a Mexican factory. U.S. soybeans and corn are sent south, then sent back in packaged food and animal feed. Cheap avocados, mangos and tomatoes flow north, even in the winter months; they could cost U.S. shoppers 15% more if Trump’s tariffs are enacted. One analyst recently predicted a 4.5% price increase for Corona and Modelo beer. Medicines (and their ingredients) are often imported to help keep prices down. So are building materials such as steel and aluminum; if they get more expensive, prices for new homes and renovations will likely follow.
And then there’s retaliation to factor in. The Canadian government, for instance, has made plans to tax orange juice from Florida, whiskey from Tennessee and peanut butter from Kentucky. On Wednesday, a spokeswoman for China’s Foreign Ministry warned that her country would also “safeguard” its interests.
“We always believe there is no winner in a tariff or trade war,” she added.
Negotiating tactic
On a recent podcast, Trump explained that he is “a big believer in tariffs because I think tariffs give you two things: They give you economic gain, but they also give you political gain.”
What Trump really means by “political gain” is “leverage” — leverage that is powerful enough, in his view, to stop a war.
“I can do it with a phone call,’’ he boasted in August. “We’re going to charge you 100% tariffs.’” And all of a sudden, the president or prime minister or dictator or whoever the hell is running the country says to me, ‘Sir, we won’t go to war.’”
Hence Wednesday’s Russia-Ukraine threat.
The question now is whether Trump’s potential Canada-Mexico-China tariffs fall into the same category. As soon as Trump proposed the new duties back in November, Canadian Prime Minister Justin Trudeau flew to Mar-a-Lago, and Mexican President Claudia Sheinbaum spoke to Trump by phone. With migration down sharply in 2024, Trump could conceivably spend the next 10 days negotiating with his North American neighbors — then credit his threats for any concessions he might extract.
Lessons from Trump’s first term
Trump tested the waters on tariffs during his first four years in office. Almost immediately, “Trump hit a slew of countries with tariffs on steel and aluminum,” according to the New York Times, then “wielded those taxes as leverage against Canada and Mexico to renegotiate NAFTA.”
He followed up in 2018 with “significant tariffs” on Chinese goods — including smart watches, chemicals, bicycle helmets and motors — “then continued to ratchet them up over the next 18 months until his administration signed a trade deal with Beijing in January 2020.”
Ultimately, the percentage of total imports covered by tariffs more than doubled during Trump’s presidency — and his successor, President Joe Biden, had kept many of Trump’s import duties in place.
“When people or countries come in to raid the great wealth of our Nation, I want them to pay for the privilege of doing so,” Trump tweeted in 2018. “It will always be the best way to max out our economic power. We are right now taking in $billions in Tariffs.”
But according to a recent summary of the economic research conducted by the Harvard Business Review, Trump’s 2017-21 “tariffs didn’t lower the cost of imports from China” and “manufacturing jobs didn’t come back to the U.S.” — yet “U.S. consumers paid more on specific goods” and “sectors targeted by retaliatory tariffs,” especially agriculture, “took a hit.”
What’s next?
Now Trump wants to go even further. His biggest 2024 campaign promise on tariffs wasn’t retaliatory — i.e., things from this country will get taxed at this rate if this happens. Instead, he pledged to make tariffs universal, with a blanket, baseline tax of 10% to 20% on most imports; an additional tax of 60% or more on Chinese goods; and a plan to match the taxes other countries impose on U.S. products, tit for tat.
During his first term, Trump’s advisers reportedly steered him away from this sort of thing, warning that universal tariffs could tank the stock market and depress the economy. And questions remain about whether the president even has the legal authority to impose the sort of sweeping levies Trump now favors; court challenges would almost certainly follow.
Either way, economists have been clear about the risks ahead. “The 2018-to-2019 trade war was immensely damaging, and [Trump’s universal tariff plan] would go so far beyond that it’s hard to even compare,” Erica York, senior economist at the Tax Foundation, a right-leaning think tank that opposes the tariffs, told the Washington Post earlier this year. “This threatens to upend and fragment global trade to an extent we haven’t seen in centuries.”
