President Donald Trump briefly imposed 25% tariffs on goods from Canada and Mexico this week, before delaying some of them once again until April 2. The newly doubled levies on Chinese imports are still in place, at least as of
Friday morning.
If fully implemented, these tariffs will impact $1.4 trillion worth of imports from America’s largest trading partners, according to the Tax Foundation.
U.S. businesses and consumers, not other countries, are the ones who end up paying for tariffs. That’s because tariffs are a tax that importers pay to the U.S. government. To compensate for that tax, importers can either eat the costs or
pass them along to you in the form of higher prices.
The Budget Lab at Yale University, a nonpartisan policy research center, looked at the consequences of 20% tariffs on China and the proposed 25% tariffs on Canada and Mexico. In total, households could lose an average of about $1,600 to $2,000 in real disposable income over the next year. Various organizations have attempted to assess how Trump’s different proposed tariff policies will affect prices. The amounts may vary, but all have found that consumers will end up paying more for their groceries and everyday goods.
The price of fresh vegetables and fruits could rise 2.9% over the next year, according to the analysis. The U.S. depends on countries with warmer climates to import fresh produce that it normally couldn’t get out of season, said Andrew Greenland, an assistant professor of international economics at North Carolina State University. “The only way for us to get those things is to be willing to pay the tariff." Some key food imports from Mexico include avocados, strawberries, raspberries, tomatoes and peppers, said David Ortega, a food economist and professor at Michigan State University.
But while importers may pass the cost on to consumers, that doesn’t necessarily mean retailers will hike prices by 25%, he explained. Transportation expenses, along with wholesaler and retailer margins, make up a significant portion of an item’s price, and those costs aren’t subject to tariffs, Ortega said. Tariffs on China, Canada and Mexico could also lead to an average price increase of 10.6% for computers and electronics, 7.5% for apparel and 6.1% for automobiles, the Budget Lab found.
A 10% tax on Canadian energy will probably increase energy costs for some U.S. residents, namely those who live near the Canadian border. Neale Lunderville, head of Vermont Gas Systems, told Marketplace that the provider passes its costs on to customers. “A 10% tariff on Canadian energy will mean a direct rate impact for our customers,” Lunderville said.
The U.S. also imports lumber from Canada and gypsum from Mexico, which is used for drywall. Tariffs on these crucial construction materials could lead to higher home prices. Meanwhile, Trump’s steel and aluminum tariffs could also lead to price increases for everyday products, including air-conditioning units, buildings and cars that require steel, Greenland said. |
