Canada, Mexico tariffs create ‘fire effects’ on consumer prices

Tariffs to Canada and Mexico entered into force on Tuesday – And they will increase prices for consumers, sometimes in unexpected ways, according to economists.

Tariffs are a foreign import tax that paid the subject of the United States that imports a certain good.

President Trump on Tuesday imposed 25% of tariffs in Canada and Mexicotwo largest trade partner of the United States. Trump set a lower tariff of 10% on Canadian energy.

Companies usually transmit some additional tariff costs to consumers, economists said.

Certain products such as fruits and vegetables from Mexico and oil from Canada – which are among their main exports to the US – will become more expensive as a result, economists said.

But there are also far -reaching influences through supply chains that are not so clear, they said.

“Tariffs create the effects of corrugated valves moving through complex supply chains in ways that are not always obvious,” wrote Travis Tokar, a professor of supply chain at Texas Christian, e-mail.

Such a dynamics make it a challenging prediction of the precise effects of products and prices, said Tokar.

For example, take a sandwich with fast food chicken. Although none of its ingredients can come directly from Canada or Mexico, the aluminum foil used in its packaging may increase the costs that could be transferred to consumers, Takar said.

Almost everything that consumers buy truck transportation is stimulated by refined oil products – which means that the influence of the tariff on the Canadian raw oil “could be much wider than it seems at first glance,” said Tokar.

Now the sources of almost half of their foreign fuel from Canada, according to At the Peterson Institute of International Economics.

“The costs at the end have to go through the supply chain” to the end consumer, said Mary Lovely, a senior associate of the Institute for International Economics of Peterson.

The US 2024 traded $ 1.6 trillion with Canada and Mexico with Canada and Mexico, which accounts for more than 30% of the total US store, according to the census bureau data since December.

The Tariffs of Canada and Mexico are expected to cost an average US household $ 930 in 2026, according to January analysis by the Center for Urban Numbers Tax Policy.

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The fees would cost a typical household of $ 1,200 a year after they also calculated tariffs at China, according to Piiie analysis. (The analysis considered only 10% of the Chinese import tariff that Trump imposed in February; he put another 10% of tariffs on Tuesday.)

That piie assessment of consumer influence is “conservative,” Lovely said.

For one thing, not a factor for domestic manufacturers probably responding to smaller foreign competition, she said.

“These tariffs will increase the price of imported goods,” and domestic manufacturers are likely to increase their prices to “match” those of their foreign colleagues, said Alexander Field, a professor of economics at Santa Clara University.

All in all, the tariffs of Canada and Mexico could have Add nearly $ 6000 a car priceAccording to Investment Bank Benchmark Co. in February. It’s a dynamics It is expected to increase car insurance premiums.

“This will be extremely disturbing for the auto industry,” said Douglas Irwin, a professor of economics at Dartmouth College and the author of “Failing to Trade: History of US Trade Policy.”

Brian Cornell, Target CEO, said Mexican tariff Could force the company to raise the prices of fruits and vegetables – including strawberries, avocados and bananas – within a few days.

Food prices would increase almost 2%in the short term, according to the Yale Budget laboratory analysis Karine, Mexico and China. Fresh product prices would increase almost 3%.

Building materials are also large exports from Canada – including more than 40% of American imports of wood products, according to PIIE.

“If you do renovation this summer, you are somehow lucky,” Lovely said.

Large corporations can be able to absorb some tariff costs instead of transmitting everything to consumers, Lovely said. But agricultural manufacturers may not be able to, for example, because there are often “very low margins in the supply chain,” she said.

Even companies that absorb some of the costs – to avoid immediate shock for consumers’ stickers – means that they have less profit to invest in new equipment, hire workers or develop new products, which creates “economic withdrawal less visible, but still significant,” Takar said.

Consumers would also influence Foreign Retaining in the US Shop – Something that officers in Mexico, Canada and China have already committed.

“You’re not putting such tariffs in a place without the expectation of retaliation, and that is happening right now,” Field said.

Canadian Prime Minister Justin Trudeau on Tuesday announced a 25% levy on imports worth $ 30 billionin effect immediately. Tariffs still 125 billion US goods from C degrees for 21 days, he said.

Trump responded on Tuesday, promising additional tariffs to Canada.

Ontario will impose 25% of electricity taxes exported to 1.5 million homes in Minnesota, Michigan and New York in retaliation with Trump’s tariffs, Doug Ford said, the province leader, said Wall Street Journal.

China also announced the retaliation of tariffs up to 15% aimed at American agriculture. American corn will face 15% levy, while soy will be affected, for example, 10%. Mexican President Claudia Sheinbaum plans to post retaliation on Sunday.