President-elect Donald Trump campaigned on tariffs. This week, he promised even more.
Trump said Monday he intends to impose a 25% tariff on products imported to the U.S. from Mexico and Canada while increasing a previously proposed tariff — as much as 60% — on all Chinese goods by an additional 10%.
The tariffs would be a significant escalation of Trump’s previous proposal, which was already a major increase on more targeted tariffs enacted during Trump’s first administration and kept in place by President Joe Biden.
An estimate from The Budget Lab at Yale shared Wednesday with NBC News found that the cost to consumers from Trump’s proposed tariffs could reach as much as $1,200 in lost purchasing power on average based on 2023 incomes, assuming retaliatory duties on U.S. exports are put into place.
Mexican President Claudia Sheinbaum has already warned that any new tariffs imposed by the U.S. would be met with retaliatory ones by her country. Canada is similarly considering its own options, including possible tariffs on U.S. goods, according to The Associated Press.
America’s biggest import from Canada is oil — and any increase in energy prices would likely be felt throughout the economy.
“Another way to think about this is it’s 4 to 5 months of a normal year’s inflation in one fell swoop,” Ernie Tedeschi, The Budget Lab’s director and the former chief economist under the Biden administration, said in an email.
The three countries Trump has selected for a new round of targeted tariff proposals — China, Mexico and Canada — represent nearly half of all U.S. import volumes.
While Trump has insisted other countries end up paying the cost of tariffs, most economists agree those costs wind up getting passed on to shoppers. And at a time when rising prices remain a top concern, the types of goods that could see higher costs are the ones consumers interact with every day.
Some companies are warning that particularly import-heavy parts of the economy could be hit hard. Best Buy CEO Corie Barry warned Tuesday that any added costs on U.S. imports “will be shared by our customers.” Electronic goods account for the largest share of U.S. imports from China as of 2023.
“There’s very little in [the] consumer electronics space that is not imported. … These are goods that people need, and higher prices are not helpful,” Barry said.
From Mexico, the biggest impact would be to car buyers, as automobiles accounted for $130 billion worth of imports last year. The U.S. auto industry has so far not yet commented on what the impact to the sector would be if Trump follows through. But any increase in costs would come at a time when U.S. consumers are already struggling to finance vehicle purchases.
The U.S. also takes in a significant share of its fresh produce from Mexico.
Trump has made threats of all kinds in the past, including on tariffs, with unpredictable and inconsistent follow-throughs. But businesses and retail groups, as well as economists, are nevertheless taking the latest statements seriously.
In a statement sent to NBC News last week, the National Retail Federation warned about the impact of tariffs to everyday households.
“The last thing Americans want is upward pressure on their family finances,” the organization’s statement read. “Every single credible, non-partisan research project related to raising tariffs on our trading partners proves one thing: Consumers will pay higher prices for both discretionary and non-discretionary products and services.”
In a statement to NBC News, a Trump spokesperson said:
“In his first term, President Trump instituted tariffs against China that created jobs, spurred investment, and resulted in no inflation. President Trump will work quickly to fix and restore an economy that puts American workers by re-shoring American jobs, lowering inflation, raising real wages, lowering taxes, cutting regulations, and unshackling American energy.”
Trump’s allies in conservative media have largely waved away economic concerns about tariffs, framing the president-elect’s threats as a chess move to force Mexico and Canada to comply with his policies on fentanyl and migration.
“It’s a story about the art of the deal,” Fox News host and former Trump spokeswoman Kayleigh McEnany said Tuesday on the network. “What President Trump has done — quite brilliantly, I would say — is issue the opening salvo to a heavy-handed negotiation.”
“Tariffs will hurt the American consumer, that’s true,” Rep. Dan Crenshaw, R-Texas, conceded Tuesday on Fox News. “But they also make for good negotiation tools.”
Some Trump allies suggested the president-elect doesn’t actually plan to follow through with the proposed tariffs.
“I think what President Trump is trying to do is saying if we get together and solve this problem, those tariffs need not happen,” media mogul Steve Forbes said Tuesday on Fox News. “This is not just about the tariffs, per se, but also about Mexico getting control of the border.”
In fact, there has already been progress on curbing drugs and migration this year: According to the Centers for Disease Control and Prevention, the U.S. saw a 14.5% decrease in overdose deaths from June 2023 through June 2024. And for the first time since 2021, the U.S. Drug Enforcement Administration has seen a decrease in the potency of fentanyl pills.
Meanwhile, migrant flows have plummeted this year, according to U.S. Customs and Border Patrol data. And in her statement reacting to Trump’s posts, Mexico’s Sheinbaum stated caravans of migrants were no longer reaching the border.
Douglas Irwin, a trade historian at Dartmouth University, said Trump has tended to see tariffs as a cure-all for a variety of economic issues the U.S. is contending with.
That makes evaluating their ultimate efficacy all the more difficult.
Trump, he said, “co-mingles” his objectives for tariffs “all at the same time, so you’re never quite sure why they’re being imposed,” Irwin said.
“Is it for revenue, to reduce the deficit, to bring back jobs? And now he’s talking about tariffs to punish Mexico and Canada for not enforcing drugs and migrants across the border. … In terms of judging whether they are successful, you have to ask what objective you’re trying to achieve.”
