Trump's Tariffs Explained: Potential Impact On Pricing For Cars, Electronics And More

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Unless you've been living under a rock for the last couple of weeks, news of President Donald Trump's import tariffs on China, Mexico, and Canada shouldn't come as a surprise. With Trump finally signing executive orders on Saturday under the International Emergency Economic Powers Act (IEEPA), the heavy tariffs (up to 25%) are expected to go into effect tomorrow. It doesn't take a genius to realize that this will have significant repercussions on the costs of goods, ranging from cars, electronics, food, fuel, etc. Nonetheless, let's quickly dig into what the experts have to say about this.

In a claimed bid to hold China, Mexico, and Canada accountable for "halting illegal immigration and stopping poisonous fentanyl and other drugs from flowing into our country" (per a White House fact sheet), President Donald Trump was made to impose the IEEPA on some of its largest trading partners. China imports will see a 10% tariff, while Canada and Mexico will face a stiffer 25% tariff (aside from energy products from Canada, which will be subjected to a 10% tariff). Note: Tariffs are taxes on imported goods from another country.

Following the tariff announcement, John Murphy, U.S. Chamber of Commerce Senior Vice President and Head of International, warned of negative effects for consumer and supply chains. Murphy said, "The President is right to focus on major problems like our broken border and the scourge of fentanyl, but the imposition of tariffs under IEEPA is unprecedented, won’t solve these problems, and will only raise prices for American families and upend supply chains." 

With most goods being made overseas, these tariffs, which some experts believe Trump sees as more of a revenue source for the U.S., will undoubtedly increase prices everywhere, even if we may don't see it initially. Electronics, for example, come mostly from China, followed in volume by machinery, toys, furniture, and so on. 

The U.S. imports much of its agricultural goods from Mexico and Canada. Canada exports about 60% of crude oil to the U.S., mostly through mid-west pipelines. The automotive sector will be hit hard as well, since many of our vehicles and major components are made by our northern and southern neighbors.

Mike Wall, executive director for automotive analysis at S&P Global Mobility, said that consumers will see tighter vehicle inventories plus dealers offering less incentives or deals. Wall emphasizes how "a 25% tariff is just massive in this industry.”

While Trump believes that something like the IEEPA can aid in trade/political negotiations, the fact that Canada and Mexico have so far threatened retaliation by way of tariffs on the U.S., citizens and consumers could be in this for the long haul. We could very well  be seeing something similar to the economic and supply effects of Covid shutdown (plus tariffs imposed during Trump's first term), although there are signs that some manufacturers have adapted their business models based on that experience.