The tariffs President-elect Donald Trump has threatened to impose on imports from Mexico and Canada would significantly increase U.S. inflation next year and modestly curtail economic growth, economists and trade experts say.
Monday, Trump vowed to hit all goods shipped to the U.S. from Mexico and Canada with a 25% tariff and all Chinese imports with a 10% levy on his first day in office, Jan. 20. In a social media post, Trump said his aim is to pressure the countries to stop the flow into the U.S. of illegal drugs and immigrants who lack permanent legal status.
Several experts said the threat was probably a negotiating tactic intended to prod the countries to take action on drug trafficking and illegal immigration. Gary Hufbauer, senior fellow at the Peterson Institute for International Economics, said the Trump administration probably would schedule the fees to take effect in March, which would give countries time to negotiate a deal that addresses the disputes.
Otherwise, he said, the levies likely would spark retaliatory tariffs from Mexico and Canada, possibly creating an intractable trade conflict.
“At that point, it’s very difficult to unwind the tariff wars,” Hufbauer said.
But if Trump follows though on his pledge, it would substantially boost inflation next year after pandemic-induced consumer price increases had largely abated, economists said.
Economists already had anticipated at least a 10% tariff on Chinese imports next year and built that into their forecasts. During his presidential campaign, Trump said he would impose a 10% to 20% tariff on all imports and as much as a 60% duty on Chinese goods to incentivize companies to move production to the U.S. or buy American-made products.
What does America import from Mexico?
High tariffs on Mexico and Canada were not expected and would violate the North American trade pact that took effect in 2020. The U.S. imported $480 billion in goods from Mexico last year, including vehicles, electrical equipment, machinery, furniture, plastics and metal, according to Trading Economics.
How much does the US import from Canada?
The $429 billion in 2024 imports from Canada included vehicles, machinery, wood, metal and pharmaceutical products, Trading Economics figures show.
New fees on goods from Mexico, Canada and China would cost a typical American family an additional $1,300 a year, said Brendan Duke, senior director of economic policy a the left-leaning Center for American Progress.
Tariffs would especially hobble the U.S. auto industry, which imports raw materials from Mexico to make parts that are then shipped back to that country for vehicle assembly, Hufbauer said. Some parts cross the border several times as they’re enhanced before vehicles are sold to American consumers, which could pile on several rounds of tariffs.