On Saturday February 1st, President Donald Trump officially moved forward with his tariff plan. Trump officially imposed new tariffs on Canada, Mexico and China, a significant escalation in trade tensions and foreign affairs in general. These tariffs, which take effect on Tuesday, February 4, include 25% tariffs on Canadian and Mexican imports and 10% on Chinese goods. Tariffs on crucial energy imports from Canada will be lower with just 10% tariffs on those products, an acknowledgment of US and Canadian energy interdependence.
In retaliation, Canada, and China announced counter tariffs. Canadian Prime Minister Justin Trudeau confirmed 25% retaliatory tariffs, set to begin on the same day as Trump’s tariffs. Some Canadian politicians also pushed to ban U.S. alcohol brands from Republican-led states. After the news of incoming tariffs Prime Minister Tradeau said, “Yes, we’ve had our differences in the past, but we’ve always found a way to get past them. As I’ve said before, if President Trump wants to usher in a new golden age for the United States, the better path is to partner with Canada, not to punish us.” Trump’s executive orders include a clause allowing for higher tariffs if trade disputes escalate.
UPDATE: Since Sunday there have been major negotiations and changes on the tariff front. On Monday, February 3rd, The U.S. and Mexico reached an agreement to postpone the planned 25% tariff on all Mexican imports for one month, after Mexico agreed to ramp up security at its border. On February 4th, a last-minute call between Trump and Canadian Prime Minister Justin Trudeau led to an agreement to postpone tariffs 30 days in return for reinforcing the border with the US with the mission of clamping down on migration and the flow of the deadly drug fentanyl. As of February 4th, the tariffs on China remain in place.
The general consensus on tariffs is that the consumer ends up paying for them in the end. For example, In Trump's first term he implemented a 50% tariff on washing machines, due to this, the price of washing machines jumped 12%, and an extra $1.5 billion a year was spent on washing machines.
Electronics such as laptops and smartphones could see notable price increases due to tariffs on China especially. Studies suggest that the price of a typical laptop might increase by about $350 and a smartphone by about $200. Moreover, if Trump does decide to impose the 25% tariff on Mexico after the month-long delay, fresh produce like avocados and mangoes could become more expensive. Pharmaceutical products, relying on ingredients imported from China, are another category where consumers might feel the impact through increased medication costs.
There are broader economic implications as well; the National Retail Federation estimates that these tariffs could reduce American consumers’ spending power by $46 billion to $78 billion annually, affecting various sectors like furniture, household appliances, and travel goods.
Sources:
Comments