What New Tariffs Mean for the US Economy

Since officially announcing his bid for President in late 2022, the cornerstone of President Trump’s economic plan has been to impose tariffs. This initially started with Chinese goods, as he hoped imposing tariffs on them would help promote internal manufacturing in the US, instead of purchasing the majority of goods used in the US from China. However, as this plan evolved, it expanded into imposing tariffs for other countries too, including Canada and Mexico. This plan brings up 3 main questions: what was Trump’s thinking behind these tariffs, what goods are being taxed, and what does this mean for the everyday consumer?

When imposing tariffs on other countries, the intention is usually to increase revenue, ensure that other countries’ profits in the US economy are curbed, and promote domestic manufacturing. One of Trump’s main arguments for imposing tariffs, however, has been to fight against drugs being imported into the US. On the White House website, it reads, “President Trump is taking bold action to hold Mexico, Canada, and China accountable to their promises of halting illegal immigration and stopping poisonous fentanyl and other drugs from flowing into our country.” However, according to CNN, Canada is responsible for only 0.2% of the illegal drugs seized at US borders. Additionally, he fails to make clear how imposing tariffs on Canadian goods will help curb the amount of illegal substances being brought in in the first place, as illegal goods are not generally accounted for, unless they are seized. The other argument behind the president’s new economic policies is to promote American manufacturing. However, in reality, this will still likely not come to fruition, as although labor practices in China and Mexico may not be humane, they offer far cheaper manufacturing rates compared to the stringent American labor laws, which make American manufacturing far more expensive. Even with the introduction of tariffs, major manufacturing-based companies such as those in the tech industry and auto industry will likely still not relocate their manufacturing to domestic sites. 

The main imports being taxed by Trump’s new economic policies would include products mainly from Mexico, Canada, and China. The American auto industry in recent years has massively shifted outside of the US and over to Mexico. Major automakers such as BMW, GM, Volkswagen, and Toyota have moved their manufacturing to Mexico, as they offer cheaper labor rates due to the lack of workers’ rights. According to the Wall Street Journal, the US also imports vital farming goods such as corn, coffee, sugar, beans, tomatoes, and avocados from Mexico, which are all very popular amongst US consumers. Canada is also a major importer of cars, as well as lumber and energy, which would all be taxed without a clear alternative. In this growingly digital age, especially with the advancement of AI technology, it is becoming more and more important to have access to computer chips, most of which are imported from China, one of the countries facing the harshest tariffs. According to CNBC, roughly 60% of chips used in the US are imported from China. 

This all leads us to the most important question: how does this affect everyday Americans? To begin with, it is important to understand who pays these tariffs. While they are technically paid for by the companies importing goods, this extra cost usually falls onto the consumer, as companies will raise prices to cover their increased profit margins. This means that every time you buy goods imported from Mexico, such as tomatoes and avocados, they will likely cost American consumers 25% more, according to the NY Post, rather than entirely being paid for by other countries. This also means that cars bought in the US will likely be more expensive, especially electric cars, as many of the computerized parts required for making electric cars are built in China. These imports will be slapped with a 35% tariff, according to Trump’s new economic plan. The Chinese tariff also means that most goods made with computer chips, which is becoming an increasing percentage of goods sold in the US, will be more expensive for the everyday American consumer, as they also have to pay for the extra 35% cost of those computer chips.  Lumber will also be more expensive for home developers, making it even more expensive for Americans to purchase homes, an already growing issue in the US.  

While you may think that all of this will promote consumers to buy American goods, companies will most likely use this increased demand for American goods to increase their prices. This means that regardless of where US consumers buy their products from, the only result will be increased prices for everyday Americans. 

This is according to the Trump administration as of February of 2025, however, this is likely to change as the administration’s foreign policy is ever-changing. The president continues to use tariffs as a negotiating tactic when meeting with other world leaders, a move that may result in further changes to tariffs. 

Please be advised that this article was written in early March. Since then, new updates have emerged on tariffs and the Trump Administration.