Consumers could see price hikes if the Trump administration’s 25% tariffs on Mexico and Canada take effect Tuesday as promised—though there are some indicators President Donald Trump could reduce the tariffs as White House officials say the two countries have already begun to meet some of his border enforcement demands.
U.S. President Donald Trump speaks to members of the media before boarding Marine One on the South ... [+]
It’s unclear how much of the added cost of the Canadian and Mexican tariffs businesses could transfer to consumers, or whether Trump will go with 25% tariffs, but most economists believe tariffs lead to higher prices.
If Trump follows through with 25% tariffs on Canadian and Mexican goods and 10% tariffs on all other imports, as he floated in the campaign, prices on around a quarter of all consumer spending could rise 0.81% if businesses pass along half the costs, or 1.63% if the costs are fully transferred, according to a Federal Reserve Bank of Atlanta study.
The 25% Canada and Mexico tariffs would amount to an estimated total tax increase of between $120 billion and $225 billion, according to Jacob Jensen, a trade policy analyst at the center-right think tank the American Action Forum, told the Associated Press, while the Tax Policy Center estimates after-tax income would fall by $930 on average next year from the tariffs on Mexico and Canada, and the Peterson Institute for Economics predicts the tariffs on Canada, Mexico and China would cost the typical U.S. household $1,200 a year.
Groceries: A significant portion of food products, from meat and grains to fresh vegetables, are imported from Canada and Mexico—Canada is the largest exporter of meat to the U.S., while 77% of fresh vegetables were imported from Mexico and 11% were imported from Canada in 2020, according to the USDA.
Alcohol: The U.S. imported about $26 billion in alcohol from Mexico in 2022, while 18% of beer consumed from the U.S. stems from Mexico, according to the USDA.
Gas prices: Canada is the source of about 20% of oil used by Americans, while Canada and Mexico together account for 70% of U.S. crude imports—a 25% tariff could hike gas prices by 30 to 40 cents per gallon, GasBuddy head of petroleum analysis Patrick De Haan predicted to CBS last year, though Trump said earlier this year Canadian energy and oil exports would be subject to a lower 10% tariff.
Lumber: Canada is the largest supplier of lumber to the U.S., and the tariffs could lead the price per thousand board feet to jump to $600, up from just under $590, according to the Forest Resources Association; Trump last week also ordered the Commerce Department to investigate whether lumber imports threaten national security as White House officials argue the U.S. should be self-sufficient in the lumber industry and that existing policies have driven up construction and housing costs.
Cars: The average price of a new car would increase by an estimated $3,000, as 22% of all vehicles sold in the U.S. are imported from Mexico and Canada, according to S&P Global, while a study by Anderson Economic Group cited by multiple outlets estimates a $9,000 price increase for a large SUV with a significant number of parts produced in Mexico and $8,000 for a pickup truck.
$900 billion. That’s the total value of Canadian and Mexican imports to the U.S. each year, according to the Brookings Institution.
The tariffs are expected to take effect at 12:01 a.m. Tuesday, but Commerce Secretary Howard Lutnick said Sunday Trump could adjust the 25% figure, telling Fox News Mexico and Canada have “done a reasonable job” firming up border security, Trump’s primary demand in threatening the tariffs. Calling it “a fluid situation,” Lutnick said there would be some tariffs, but “exactly what they are, we’re going to leave that for the president and his team to negotiate.” Lutnick reiterated in a CNN interview Monday Trump “knows they’ve done a good job on the border,” but the countries “haven’t done enough on fentanyl.” He said the president would “decide this afternoon and tomorrow we’re going to put out those tariffs.”
An additional 10% tariff on Chinese goods is also set to take effect Tuesday, on top of the 10% tariff Trump imposed that took effect Feb. 1.
Trump officially announced on Feb. 1 he would impose a 25% tariff on all imports from Canada and Mexico, with an exception for Canadian energy and oil experts, which would be taxed at 10%. While Trump hasn’t explicitly detailed what the countries can do to alleviate the tariffs, he has cited the flow of fentanyl from both countries, in addition to China, in threatening to impose the levies. Days after his initial announcement, Trump said he would delay the tariffs for a month amid negotiations with Canadian and Mexican leaders and assurances from both countries that they would do more to meet Trump’s demands on fentanyl and the border. Despite experts’ warnings about the cost to consumers, Trump told reporters Thursday “it’s a myth.”
How Will Tariffs Impact You? Here’s What To Know About Trump’s Plans (Forbes)