What could get more expensive if Trump launches a new trade war with Mexico and Canada
Elisabeth Buchwald
Updated 5 min read
During President-elect Donald Trump’s first term, America launched an all-out trade war with China to boost US manufacturing, secure US national security interests and resolve what Trump believed was an extremely out-of-balance trade relationship.
President Joe Biden kept most of those tariffs in place and added a few new ones, too. While leaders of the two nations continue to butt heads, US consumers have paid the price, shelling out more money on goods imported from China.
Now, Trump is focusing his attention on America’s largest and third-largest trading partners: Mexico and Canada. And he’s promising something extraordinary: Come January 20, the day Trump is set to be inaugurated, he pledges he will slap a new, 25%, across-the-board tariff on all goods the US imports from its closest neighbors — goods that are almost all coming across the border for free because of the Trump-negotiated US-Mexico-Canada Agreement, or USMCA.
Translation: Brace yourself for a potential trade war that could seriously lighten your wallet.
Here are some of the top consumer goods Americans buy from their neighbors to the north and south that could get more expensive if Trump follows through with his tariff plan:
Gas
Crude oil, which is refined to produce gasoline and heating oil, is one of the top imports to the US from Canada. In July it reached a record of 4.3 million barrels per day following the expansion of Canada’s Trans Mountain pipeline, according to data from the US Energy Information Administration.
The expansion has helped deliver more oil to be refined to much of the West Coast in addition to the Midwest, where it previously served most prominently.
Oil pumpjacks and tanks are pictured in a farmer’s field near Kindersley, Saskatchewan, Canada, on September 5. - Todd Korol/Reuters
“You can’t simply process different oil overnight. It would take investments/years. More US supply wouldn’t help,” Patrick De Haan, head of petroleum analysis at GasBuddy, said in a post on X.
The 25% tariff Trump floated Monday would have “huge impacts” on gas prices, amounting to an increase of between 25 cents to 75 cents per gallon, De Haan said. That would most directly impact Americans located around the Great Lakes, Midwest and Rockies.
Trump has proposed ramping up American oil permit grants, but it would take time for that supply to come online to replace oil from Canada. And it’s unclear that US energy companies would want to produce significantly more oil — global demand is slowing, and profit from ramped-up drilling would be harder to come by.
Produce
As climate change has made growing conditions in parts of the United States less favorable, the US has grown increasingly reliant on Mexico for produce.
In 2022, the US imported $44.1 billion worth of agricultural products from Mexico, amounting to a fifth of all US agricultural products, according to Commerce Department data.
A farmer works at an avocado plantation at the Los Cerritos avocado group ranch in Ciudad Guzman, state of Jalisco, Mexico, February 10, 2023. - Ulises Ruiz/AFP/Getty Images
For example, 90% of the avocados Americans consumed in 2022 were imported. Of the avocados imported into the US, 89% came from Mexico. Said differently, your guac and your avocado toast could skyrocket if 25% tariffs are levied on Mexico.
Cars
The United States imported $44.76 billion worth of vehicles from Mexico in 2023, making it the number-one import, according to Commerce Department data.
As more car manufacturers sought to get around tariffs imposed on Chinese goods, many moved their production to Mexico, making it a global hub for car factories, including General Motors, Ford, Stellantis and nearly a dozen more.
On Tuesday, shares of US carmakers plunged, with General Motors taking the biggest dive, closing down 9%.
A General Motors complex in Silao, Mexico, in 2022. - Maurico Palos/Bloomberg/Getty Images
Virtually every American auto manufacturer depends on parts from Mexico to build its cars or trucks, because those parts can be substantially cheaper than those made in the US. But a 25% tariff would likely be a game changer there.
And, behind cars themselves, car parts were the second-most imported good from Mexico last year.
Alcohol
Most of the alcohol the US imports comes from Mexico.
For instance, Mexico provided the US with more than 80% of total beer imports in the first three quarters of FY 2024, according to US Department of Agriculture data.
Additionally, tequila from Mexico and liqueurs from Canada have been “primary drivers of import growth” of distilled spirits, per the USDA.
Last year, the US imported $4.6 billion worth of tequila and $108 million worth of mezcal from Mexico, according to data from the Distilled Spirits Council, a trade group. That year, the US also imported more than half a billion dollars worth of Canadian spirits.
“At the end of the day, tariffs on spirits products from our neighbors to the north and south are going to hurt US consumers and lead to job losses across the US hospitality industry just as these businesses continue their long recovery from the pandemic,” Distilled Spirits Council president and CEO Chris Swonger said in a statement on Tuesday.
Bottom line: It’s going to hurt
The new round of t ariffs Trump is prepared to impose comes as the US has grown increasingly reliant on imports from Mexico and Canada.
For the first time in more than two decades, Mexico overtook China as the top exporter of goods to the US last year, according to Commerce Department trade data. China is now the No. 2 exporter of goods into the US, and trailing very close behind it is Canada. That’s a big shift from just two years ago, when China was the top exporter of goods into the US, and Canada and Mexico hardly came close.
This means that the new tariffs Trump pledged will be virtually inescapable for Americans, as businesses facing higher costs will likely pass that along to consumers.
CNN’s John Towfighi contributed reporting.
For more CNN news and newsletters create an account at CNN.com
