President Donald Trump has announced his intention to impose a 30% tariff on imports from two of America’s largest trading partners: the European Union (EU) and Mexico. This change could have a major effect, raising prices for critical items like medical devices and agricultural equipment. If no trade agreement is reached by then, the tariffs will be implemented on August 1.
In a letter to European Commission President Ursula von der Leyen, Trump reaffirmed that the tariffs would be “distinct.” He stated emphatically that these new tariffs would not replace the existing sectoral tariffs. This announcement has understandably raised concerns among American consumers and businesses. They are incredibly dependent on imports from these areas.
Implications for American Consumers
The proposed tariffs would result in higher prices for everyday items, from clothing to shoes. The EU exports most of the medical equipment that the United States needs to respond to this crisis. Last year, the U.S. imports of medical equipment and surgical supplies from the EU totaled $16 billion. If the tariffs go into effect, the end consumers will feel it immediately in their wallets as the prices of all these vital products increase.
Not to mention, American consumers will be stuck with higher prices for avocados—the most popular import from Mexico. In fact, last year the U.S. imported $46 billion in agricultural products from Mexico. It’s hard to overstate how a proposed 30% tariff would affect the price of these products. Tomato prices are set to skyrocket. All of this is because a very important, very specific free-trade agreement with Mexico for tomatoes is about to expire.
Kush Desai, a White House spokesperson, remarked on the broader implications of these tariffs:
“The cost of tariffs will be borne by foreign exporters who rely on access to the American economy, the world’s biggest and best consumer market.”
Trade Response from the EU
And as promised, the European Union has already indicated its intention to retaliate against higher tariffs. They want to tax American exports—particularly alcoholic beverages—so foreign countries make up for the money they lost. In fact, the EU exported more than $11 billion in beer, wine and distilled spirits to the U.S. last year. A EU reciprocal tariff would increase stress between the two countries’ economies. This dramatic step could be a catalyst for a binding trade war.
This has been exacerbated with the medical community caught in middle of Trump’s trade war, as he has proposed tariffs on medical equipment and agricultural products. He has threatened tariffs on semiconductors and pharmaceuticals, key EU exports to the U.S., in other statements. These actions may set dangerous precedent with far-reaching consequences for sectors dependent on these imports.
Economic Context and Inflation
Despite the looming threat of increased tariffs, recent inflation reports have shown relative price stability for consumers over the last three months. Both government and private-sector analysts have repeatedly warned that increasing tariffs will raise costs. The direct effect on consumer prices hasn’t really come through yet. Most analysts continue to warn about new price increases as tariffs are implemented.
The proposed tariffs are a strategic first step in that larger picture. They even invoke 25% tariffs on cars and car parts, as well as 50% tariffs on steel and aluminum. Last year, Mexico overtook China as the leading supplier of electronics to the U.S. which is why they imported $49 billion worth of computers, $20 billion in electrical machinery and $13 billion in audio and video apparatus.
With the August deadline looming, Mexico and the EU express their concerns about the proposed tariffs. They are understandably scared these tariffs will hit like an atomic bomb, demolishing their nascent economies. With both sides motivated to prevent negative impacts on their economies, negotiators on both sides might find talks growing more time sensitive.