Will Trump's tariffs raise prices? Here's how 'Liberation Day' affects imports.
Will Trump's tariffs raise prices? Here's how 'Liberation Day' affects imports.
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Mexico-US reach tentative tariff agreement
President Donald Trump and Mexican President Claudia Sheinbaum have agreed to pause tariffs on Mexican imports for one month.
President Donald Trump's plans to impose reciprocal tariffs and a 25% auto tariff on imports to the United States are likely to slow production and drive up prices, even if he reaches deals to temporarily pause them, as he did in the case of Mexico and Canada.
Trump's decision to levy 20% tariffs on imports from China and 25% tariffs on imports from Mexico and Canada earlier this year created uncertainty that is likely to raise prices until a permanent solution is found, said Mike Skordeles, head of U.S. economics at Truist.
While prices are expected to increase across the board, some items will see a price bump more quickly than others. For instance, consumers are likely to pay more for perishable foods sooner than they will pay more for their cars.
The U.S. received 51% of its fresh fruit and 69% of its vegetables from Mexico in 2022, according to the U.S. Department of Agriculture. A one-month pause on 25% tariffs for those items doesn't mean their prices won't rise.
"If I was a producer, I'd say I need to get a little more for that stuff because there is a risk it might get shut down in a month," Skordeles said.
In theory, companies can stockpile some amount of car parts. They can't stockpile avocados, which spoil within a week.
But Dr. Michael Swanson, a Wells Fargo Agri-Food Institute chief agricultural economist, said those price increases might not reach your grocery store until after this weekend's Super Bowl. There may still be time to grab ingredients for guacamole.
"It's unlikely that changes in tariffs will impact prices headed into the Super Bowl, however, we'll see how it plays out in the coming weeks," Swanson told USA TODAY. "This is certainly the year for consumers to stay food fluent."
More: What items will cost more? What to know about Trump's tariffs on Canada, Mexico, and China
Oil tariff will affect costs of most products
Trump's originally proposed 10% tariff on Canadian oil, which Skordeles said equates to a roughly 16 cent increase per gallon, would eventually raise the price of almost everything because companies need fuel to transport their products across the country. Retaliatory actions by the three U.S. trade partners are also likely to stir up trouble for American companies.
"This is a mess," Skordeles said. "There are so many unintended consequences."
Tariffs are a tax on the exchange of goods between countries, largely paid for by American companies in this instance. In a world where free trade in North America has been a given for decades, many supply chains, particularly those for cars, involve goods moving across borders before a product is ready to be sold to American consumers.
Trump's originally proposed tariffs were likely to hit those who work in the automotive industry or are looking to buy a car hardest, because passenger vehicles and vehicle parts are some of the top imports the U.S. receives from Canada.
Several car parts may need to travel across the border, sometimes on multiple occasions. Skordeles gave the example of a car company transporting transmissions.
With tariffs in effect, it has to pause each time so U.S. Customs can count how many there are and ensure the correct tariffs are being applied. This process increases costs − costs that are likely to be passed on to consumers − and slows production, which could lead to supply shortages that further drive up prices.
"You might see prices go up not just for new cars but for used ones, too, as any additional scarcity in the market often drives more would-be new shoppers to consider used cars," Cars.com's Stef Schrader told USA TODAY. "Cars that depend heavily on imported parts or are fully imported from the affected countries will likely see price hikes first."
China tariffs more likely to stick
Tariffs on China are more likely to stick than those on Canada and Mexico, Skordeles said. There is precedent for the U.S. imposing tariffs on China that stuck around during Trump's first term and during President Joe Biden's time in office.
American consumers feel less impact of import tariffs at the checkout line if there are domestic substitutions for them, which the U.S. has sometimes been able to find in the past.
At times when there was no substitution for imports, such as iPhones that are assembled abroad, Apple successfully lobbied to make their product exempt from Chinese tariffs.
Contributing: Bailey Schulz
Reach Rachel Barber at rbarber@usatoday.com and follow her on X @rachelbarber_
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