President Donald Trump imposed a 25% wholesale tariff on Canada and Mexico simultaneously as part of his threatening tariffs against China, Canada, and Mexico that went into effect Saturday night.
Currently, China is only subject to a 10% duty.
Compared to his first administration, Trump is adopting a more assertive stance against the country’s neighbors. He then adopted a more focused strategy for particular industries, such as aluminum and steel.
Although there was a carve-out for Canadian energy, which will be tariffed at 10% rather than 25%, the tariffs appear to apply to the majority of categories this time around.
Numerous goods that the United States imports from its neighbors may become more costly as a result of the broad tariff. Fruits, vegetables, alcohol, liquor, electronics, and other popular Mexican imports will now cost more to import into the nation. Steel, lumber, potatoes, and grains are also from Canada.
Gregory Daco, chief economist at EY, stated that one of the main areas of commerce between the United States, China, and Mexico is agricultural products.
Merchandise goods are often thought of as furniture, automobiles, and other large machinery. However, we must remember that we also engage in a lot of trade in the agriculture sector,” Daco stated. Therefore, we could observe rising pressure on the cost of dairy and meat. These are the kinds of categories that have a direct financial impact on customers.
According to the Bureau of Labor Statistics, grocery costs have increased by 28% in the past five years, making them even more expensive.
Cars and auto parts are expected to become more expensive to import into the United States due to the three nations’ intricately linked automotive supply networks.
Owner Keith Scaglione of S&S Automotive, which provides auto repair services in Secaucus, New Jersey, says tariffs will probably raise the price of parts like oil filters, making even simple repairs more expensive for customers.
“The first obvious one will be oil changes, which typically cost between $50 and $80 for most cars these days. “It will most likely cost more than $100,” Scaglione stated.
With tariff rates potentially ratcheting considerably higher, the duties announced on Saturday might mark the start of a policy war. The White House inserted a “retaliation clause” to the tariffs when it announced them on Saturday.
“So that if any country chooses to retaliate in any way, the signal will be to take further action with respect to likely increased tariffs,” said the White House.
Under the International Emergency Economic Powers Act, which gives the president the authority to respond to extraordinary threats, Trump is imposing the tariffs. He has identified a fentanyl and opioid epidemic, which he claims is being facilitated by China, Mexico, and Canada.
The United States is focusing on its top three trading partners, which accounted for more than $1.2 trillion in imports last year, in addition to imposing a 10% duty on China.
For an industry that virtually sells crude oil to the United States, the 10% levy on Canadian energy is a significant step. According to the Canada Energy Regulator, in 2023, over 97% of all Canadian crude oil exports went to the US.
The costs of switching imports could result in higher gas prices at the pump for U.S. refineries that are specifically calibrated to Canadian oil.
Daco stated that implementing tariffs “on large trading partners would have severe economic consequences” for the United States, Mexico, and Canada, “and could lead to an environment that is both a higher inflation environment and also a lower growth environment because of the importance of the trade with both of these economies.”