President Donald Trump is set to impose 25% taxes on imports from Canada and Mexico and double to 20% his levies on Chinese products, prompting threats of retaliation from all three countries. The United States engaged in nearly $2.2 trillion in goods trade last year with these nations: $840 billion with Mexico, $762 billion with Canada, and $582 billion with China.
Trump has declared an economic emergency to justify these duties, marking the most aggressive use of tariffs by the United States since the 1930s. The sanctions are purportedly aimed at reducing undocumented migration and drug trafficking across the U.S. border.
Energy imports from Canada, including oil, natural gas, and electricity, will face a lower 10% tax rate, a concession benefiting households in the U.S. Northeast and Midwest that rely on Canadian energy.
One of the sectors likely to be impacted first by these tariffs is the auto industry. The interconnected supply chains of auto companies across the U.S., Mexico, and Canada could face significant disruptions. The U.S. imported $79 billion worth of cars and light trucks from Mexico and $31 billion from Canada last year. Additionally, $81 billion in auto parts came from Mexico and $19 billion from Canada.
China, a major supplier of auto parts to the U.S., could also be affected by these tariffs. Importers are expected to pass on most, if not all, of the cost increase to consumers, potentially leading to a $3,000 rise in average U.S. car prices.
Furthermore, Canada, as the largest foreign supplier of crude oil to the U.S., could see higher gas prices due to the tariffs. The U.S. imported $98 billion worth of crude oil from Canada in 2024, significantly more than from any other country.
Consumer goods from China, such as cell phones, computers, toys, games, and clothing, could also be impacted by the tariffs. The U.S. imported billions of dollars worth of these products from China last year.
Additionally, tariffs could affect the prices of alcoholic beverages like tequila from Mexico and whisky from Canada. The U.S. imported significant amounts of these spirits from both countries in 2023.
Moreover, American consumers may face higher prices for agricultural products from Mexico and Canada, including fruits and vegetables. A 25% tariff could potentially increase grocery prices, affecting items like avocados, of which 90% come from Mexico.
U.S. farmers are concerned about potential retaliatory tariffs from Canada and Mexico on American products like soybeans and corn. In the past, such retaliatory measures have impacted U.S. agricultural exports, leading to government reimbursements for farmers.
