The United States will impose new tariffs on goods from Canada, China, and Mexico starting February 1, potentially impacting U.S. consumers and the broader economy. The tariffs include a 25% levy on imports from Mexico and Canada and a 10% tariff on Chinese goods. These measures are expected to raise costs for the average U.S. household by $3,000 annually by 2025. Economists warn of significant economic repercussions, including a reduction in U.S. gross domestic product and heightened consumer prices.
China's role as a key supplier of toys, sports equipment, footwear, electronics, and textiles to the U.S. positions it as the country most directly impacting American consumers due to the new tariffs. With China providing 40% of U.S. footwear imports and 25% of its electronics and textiles, the tariffs primarily target consumer goods such as apparel, toys, and electronics. This focus suggests that the tariffs on China will have the largest direct effect on consumers.
"Part of these tariffs will be passed on to consumers." – Mary Lovely, a senior fellow at the Peterson Institute for International Economics
The tariffs on Mexico and Canada are expected to cause a $200 billion reduction in the U.S. gross domestic product. In addition to economic contraction, these tariffs could also exert upward pressure on food prices, affecting daily expenses for American households.
"Unlike Canada and Mexico, for which retaliation would be inconceivable, China has retaliated in the past and would likely do so again," – PIIE economists
Tariffs function as a tax on foreign imports that U.S. businesses pay to the federal government. While intended to generate revenue—about $1.3 trillion on a net basis through 2035—the tariffs may also lead to higher prices for U.S. consumers. Both direct costs from more expensive imported goods and indirect costs from economic ripple effects could contribute to this increase.
"Broad-based, universal tariffs and the damage they will do is not really a debate," – Mark Zandi, chief economist at Moody's
"They will do damage. It's just a question of how much and to whom." – Mark Zandi, chief economist at Moody's
The prospect of retaliatory tariffs poses another concern. Other nations might respond with their own tariffs, sparking a trade war that could harm U.S. producers' sales abroad. The potential for a $55 billion contraction in the U.S. economy during the Trump administration's second term, assuming China enacts counter-tariffs, illustrates this risk.
"create a lot of collateral damage" – Lydia Cox, an assistant professor of economics at the University of Wisconsin-Madison
"There are always exemptions and carve-outs." – Mark Zandi, chief economist at Moody's
The notion of exemptions and carve-outs suggests some businesses might avoid full tariff impacts, but broad-based tariffs generally result in widespread economic fallout. As businesses navigate these changes, consumers may bear much of the burden through increased prices across various sectors.