A new wave of tariffs could quickly reignite inflation on food, gas and automobiles, just as Americans were finally starting to catch a break from fast-rising prices.
President-elect Donald Trump said this week that he would impose sweeping tariffs on goods imported from Mexico, Canada and China as soon as he takes office.
Discontent with inflation has soured Americans’ view of the economy and played a major role in Trump’s presidential win.
Story continues below advertisement “We’ll try to absorb some of the cost, but 25 percent — that is massive,” Cole said.
Until Monday, Bauer was planning to move more production from China to Mexico to avoid tariffs and speed up shipping times.
Just when Americans were beginning to recover from rapidly rising prices, a fresh round of tariffs could quickly drive up food, gas, and auto inflation.
Donald Trump, the president-elect, declared this week that as soon as he assumes office, he will impose broad tariffs on goods imported from China, Canada, and Mexico. Price increases for essentials like meat, fruits, and vegetables, as well as for vehicles, apparel, and crude oil—all of which have a significant impact on family budgets—are likely to follow, according to economists.
At a time when households are already feeling the effects of years of price increases, the blowback for consumers could be substantial. Spikes in the aftermath of the pandemic increased the cost of new cars, groceries, utilities, and housing by at least 20 percent in four years, surpassing pay increases during the same time period, despite the fact that inflation has recently returned to normal levels. Inflation-related dissatisfaction has damaged Americans’ perception of the economy and contributed significantly to Trump’s election as president.
Alex Durante, an economist at the right-leaning think tank the Tax Foundation, declared, “The biggest takeaway from this election was that Trump won because people really hated inflation; they hated seeing prices rise.”. However, Trump’s proposed policies could rapidly exacerbate that situation, he said. Tariffs increase the cost of goods. They cause poverty and economic contraction. “”.
Members of Trump’s transition team have resisted the notion that tariffs would lead to broadly distributed inflation. In a recent radio interview, Treasury Secretary nominee Scott Bessent stated that reductions in demand elsewhere would counteract price increases, even if some did occur.
Haha.
Attend to your personal finances.
“Tariffs cannot cause inflation because if the price of one item increases, people will have less money to spend on the other item unless you give them more money,” he said to Larry Kudlow on Saturday. “Inflation is caused by either raising government spending or expanding the money supply, which is what Biden accomplished. “.”.
According to Karoline Leavitt, a Trump transition spokesperson, the new government would not raise prices.
“President Trump implemented tariffs against China during his first term, which led to the creation of jobs, investment, and no inflation,” she said in a statement, promising “lower inflation” during Trump’s second term.
However, Trump’s announcement on Monday of a 25 percent tariff on Canadian imports caught Toronto-based Philip Cole, co-owner of Bisou Tea, off guard. He stated that he is “unsettled and bracing for the worst,” which for the time being entails figuring out how to avoid a sudden price increase for the stores that sell his goods across the US.
Cole stated, “We will attempt to cover a portion of the expenses, but 25 percent — that is enormous.”. Everyone will have to pay more as a result of this spreading. This is a no-win situation. “”.
In the long run, Cole is completely reconsidering his relationship with the United States. However, U. S. . About half of his yearly income comes from sales, so he is now concentrating on Europe and Britain in the hopes that the trading environment will be more stable there.
“That our best friend and trading partner would take a course that would be so devastating to both economies has been a real surprise,” he said.
Trump’s announcement has caused Wall Street banks and others to start updating their economic projections. According to Deutsche Bank, if the new tariffs are implemented, one indicator of inflation, which is currently at 2point 8 percent, could increase to as much as 3point 9 percent the following year, up from initial projections of roughly 2point 5 percent. The economists at the bank pointed out that Trump’s “economic policy goals may be at odds.”. “.”.
The Tax Foundation anticipates that the tariffs will reduce U.S. A. gross domestic product and lead to the loss of almost 345,000 jobs.
Under a trade deal negotiated during Trump’s first administration, Mexico and Canada, which Trump blamed for a flow of illegal drugs and undocumented immigrants, have been largely exempt from tariffs. Because of this, they are a well-liked location for big businesses wishing to “nearshore” production and other activities. Businesses like General Motors, Honeywell Aerospace, and Whirlpool have invested millions to increase their production in Mexico since the pandemic. Meanwhile, 99 percent of U.S. imports come from Canada. S. natural gas imports.
“I believe that most people are unaware of the importance of economic trade with Mexico,” stated Alan Russell, CEO of the Tecma Group of Companies, which assists companies in establishing and operating factories in Mexico. Without Mexico, none of our cars, kitchen appliances, or lawn mowers would be possible. “”.
However, he stated that it is unclear if the 25% tariffs are finalized or merely the beginning of a dialogue with the nation’s biggest trading partners. People close to the president-elect have stated that leaders in Canada and Mexico have responded to Trump and that talks are expected to continue in the upcoming weeks.
Heather Peterson, who owns a clothing boutique in Winona, Minnesota, is concerned that keeping her business open would be challenging if the tariffs do proceed. Since almost everything in her store, from $16 baseball caps to $78 jeans, is made in China, she claimed that even a small price increase would make the goods unaffordable for the blue-collar workers in the area.
Since people are already struggling, Peterson stated, “I try to keep my prices as low as I can because they don’t want to pay $34 for a freaking sweater.”. “We’re in serious trouble if you add more tariffs to this. The fact that everything is made in China, especially if it’s reasonably priced, cannot be avoided. “.”.
Eric Bauer, who sells his wide-brimmed hats at hardware stores and travel centers for $17 to $50, is getting ready to increase the price of his products in Alabama. Up until Monday, Bauer had intended to shift more manufacturing from China to Mexico in order to cut costs and expedite delivery. He is now frantically coming up with a new strategy and speaking with suppliers in Bangladesh, Cambodia, and Vietnam because Mexico is also in the crosshairs. However, a significant change in production would require months, he says.
“We really don’t want to raise prices, but we’ll have to pass that on if we get hit by this new tariff,” Turner Hat Co. CEO Bauer stated. “There’s just a lot of uncertainty. “”.
At the beginning of the holiday shopping season, some consumers are already experiencing financial anxiety due to the uncertainty. In anticipation of tariff-related price increases, James and Kayli Lyda of Georgetown, Texas, recently became members of Costco and are cooking more meals at home. They purchase nearly all of their produce and meat from Mexico, according to James. In addition to spending $300 on groceries each month, the couple also spends an additional $200 on beef, chicken, and bones for their two young Shiba Inus.
After being laid off, James, 40, recently found an IT job. “I was just starting to notice prices coming back down and now, it’s like, here we go again,” he said. “With the rate of inflation, we’re trying to save money for a house, but it hasn’t been feasible. “.”.
