Cars will bear fruit: goods will become more expensive due to Trump’s tariff plans | Business

U.S. President-elect Donald Trump has promised to impose 25 percent tariffs on Canadian and Mexican imports and an “additional” 10 percent on Chinese goods when he takes office in January.

Trump, who announced the plans on his social media platform Truth Social on Monday, said the measures were a response to Canada and Mexico’s failure to prevent the flow of illegal workers and drugs across the U.S. border.

He said the additional tariffs against China were a response to the flow of drugs into the United States, particularly the deadly opiate fentanyl.

According to the U.S. Census Bureau, the three countries are the U.S.’s largest trading partners, accounting for 43 percent of imports worth more than $1.3 trillion last year.

Economists expect the tariffs will lead to higher prices of many goods in the U.S., especially if the measures lead to an escalating war over mutual trade restrictions between the countries.

“If we take Trump’s threats at face value, it means we will see an immediate price increase from January 20,” Nick Marro, senior global trade analyst at the Economist Intelligence Unit (EIU), told Al Jazeera.

“US companies will feel it first, but there will be a trickle-down effect that will be passed on to US consumers.”

Higher prices at the grocery store would come as Americans are already worried about the cost of groceries after prices skyrocketed as a result of the COVID-19 pandemic.

An Associated Press poll of U.S. voters in November found that 9 in 10 felt “very or somewhat concerned” about the cost of food.

Here are some of the key goods that are likely to become more expensive under Trump’s proposals.

Vehicles

The North American automotive industry is a highly integrated business due to the North American Free Trade Agreement (NAFTA) and its successor, the United States-Mexico-Canada Agreement (USMCA).

According to data analytics firm GlobalData, nearly a quarter of all new vehicles sold in the U.S. in 2023 came from either Mexico or Canada.

In many cases, vehicles move across borders multiple times before they are finally sold in the United States.

Vehicle exports account for a large portion of Mexico and Canada’s trade with the United States.

Of the $480 billion in goods the U.S. imported from Mexico last year, vehicles and vehicle parts accounted for $130 billion, according to U.N. Comtrade data.

According to the same data set, Canadian imports of vehicles and vehicle parts to the U.S. totaled $56.35 billion, second only to energy.

According to Cox Automotive, the average price of a new vehicle in the U.S. was just over $48,000 in November, and analysts expect prices could rise by as much as 10 percent.

The companies likely to be hardest hit include Stellantis and General Motors, which import 40 and 30 percent of all vehicles sold in the U.S. from Canada and Mexico, respectively.

The companies own popular brands in the United States such as Chevrolet, GMC, Chrysler, Dodge, Jeep and Ram trucks.

Ford, Volkswagen, Honda, Nissan, Toyota, Mazda and Kia – all with factories in Mexico – would also be affected.

fruit and vegetables

Mexico is an important source of fresh food in the United States.

Last year, total agricultural imports were $45.4 billion – more than imports from any other country.

According to the U.S. Department of Agriculture, nearly half of fruit and nut imports and 63 percent of vegetable imports into the U.S. came from Mexico.

Popular products from Mexico that are expected to become more expensive include avocados, tomatoes, peppers, raspberries and strawberries.

“Tariffs distort the market and increase prices along the supply chain, causing the consumer to pay more at the checkout,” the Produce Distributors Association, an industry trade group, said in a statement this week.

U.S. consumers may not be the only group facing a higher grocery bill.

According to the USDA, the U.S. supplies 74 percent of Mexico’s agricultural imports, mostly in the form of grains, oilseeds and meat.

If Mexico makes good on its promise to impose tariffs, the prices of these goods will also rise.

“U.S. agricultural exports make up a large portion of the U.S. trade basket, and I think the agricultural lobby is already anticipating that there will be a setback,” said the EIU’s Marro.

Meat

Canada supplied the United States with $40.1 billion worth of agricultural products last year, mostly meat and vegetable oil.

Imports included $3 billion worth of beef, $1.1 billion worth of pork and $2 billion worth of live animals.

Similar to the automotive industry, the livestock and meat processing industries rely on a highly integrated cross-border supply chain.

alcohol

The U.S. imported $4.6 billion worth of tequila and mezcal from Mexico in 2023.

According to the Distilled Spirits Council of the United States, a lobbying group, both types of alcohol are popular in cocktails like margaritas, and consumption has increased 160 percent since 2019 as they make a resurgence among U.S. consumers.

Mexican beer brands such as Corona, Modelo Especial and Dos Equis are also popular in the USA.

Mexican beer accounts for 83 percent of all U.S. beer imports, worth more than $3 billion, according to Mexican trade data.

According to the Distilled Spirits Council, the U.S. also imported about $537 million worth of spirits from Canada last year, including $200 million in whiskey imports. These include brands such as Canadian Club and Crown Royal.

The lobbying group said this type of alcohol cannot be “relocated” to the U.S. because of the unique geographic connection.

Crude oil

Canada is a major U.S. energy source, supplying 60 percent of all crude oil imports in 2023.

According to the Canadian government, this equated to four million barrels of crude oil per day, worth more than $124 billion.

Most Canadian crude is transported via pipelines to oil refineries in the U.S. Midwest, where analysts say fuel prices would rise in the event of new tariffs.

According to the US Energy Information Administration, Canada also supplies almost all US natural gas imports – 99 percent in 2022.

Although the U.S. is also an exporter of natural gas, the EIA noted that Canadian imports are still important to meet winter demand.

The most visible effect of higher crude oil prices is higher prices at the pump for drivers.

But more expensive crude oil would also drive up the cost of countless goods that use petroleum derivatives, from nylon stockings to fertilizers to medicines.

electronics

Popular US retailers Walmart and Best Buy say they will likely have to raise prices if Trump follows through on his threats against China.

In addition to threatening a 10 percent retaliatory tariff on Chinese fentanyl, Trump said during the campaign that he would impose tariffs of 60 percent or more for what he said were unfair trade practices.

Both companies sell consumer electronics such as video game consoles, computers, televisions and smartphones – many of which are made in China.

Consumer electronics and lithium-iron batteries accounted for nearly 30 percent of all U.S. imports from China last year, according to the Atlantic Council.

Tariffs could also trigger disruptions in the supply chain, potentially leading to delays, shortages and further costs.

Those additional costs will be passed on to consumers, Best Buy CEO Corie Barry told investors in an earnings call this week.

“There is very little in the consumer space that is not imported,” she said. “These are goods that people need, and higher prices are not helpful.”