Among President Donald Trump’s wave of executive orders signed on Day One, one major campaign promise was missing — imposing universal tariffs on all imports.
Instead, Trump told reporters he would narrow his focus on Canada and Mexico and pledged to impose 25% tariffs on both neighboring countries as soon as Feb. 1, 2025. The threat of said tariffs would be levied in retaliation for allowing illicit drugs and migrants to cross the border.
Trump is also considering slamming China with a 10% tariff on all imported goods, accusing the country of allowing fentanyl into the U.S. That’s far less than the 60% tariff Trump mentioned in his campaign trail, and the 100% tariff threatened over Tiktok’s ownership earlier this month.
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Within his first week in office, Trump also said he would impose “taxes, tariffs, and sanctions” on Russia if it didn’t end the Ukraine war soon. It’s unclear how soon those tariffs and threats would come to pass, if at all.
What’s imminent, however, is how Trump’s sweeping would-be tariffs will impact your wallet as a consumer in the United States. Economists warn that tariffs on China, Mexico, and Canada can impact the cost of everyday essentials like food, gas, and clothing.
Here’s where you could see prices rise sooner than you think.
Food prices could spike across the board
Prices in the grocery aisle could leave you with a bad taste. The cost of food is 25% higher than pre-COVID levels, the Food Industry Association said, and it doesn’t seem to be easing anytime this year.
Mexico and Canada are two of the United States’ top trading partners, according to Wells Fargo. Aside from the European Union, comprised of 27 sovereign nations, Mexico is the largest source of all U.S. imports.
To start, Mexico is the largest supplier of fresh fruit and vegetables to the U.S., responsible for 92% of all agricultural imports to the country, according to the latest government data. It’s also a major supplier of distilled spirits, per the International Food Policy Research Institute.
A 25% tariff on Mexico will cause the cost of fresh vegetables, fresh fruit and berries, baked cereals, and avocados to rise.
Outgoing Canadian Prime Minister Justin Trudeau said U.S. consumers will pay more if Trump imposes tariffs on Canadian goods. For Trudeau, nothing is “off the table” as the country is considering putting retaliatory tariffs on beverages like Florida orange juice and other goods if Trump imposes 25% tariffs on all Canadian imports. The list may go on.
According to the U.S. Department of Agriculture, Canada is a major supplier of essentials on your grocery list. Just to name a few: baked goods, cereals, pasta, vegetable oils, beef products, live animals, chocolate, and other grain products are imported from Canada.
The price of vehicles could rise significantly
Purchasing a car or auto parts may become even more expensive if Trump’s 25% tariffs on Canada and Mexico are enacted.
The steep tariffs may interrupt supply chains from the auto industry causing the spike in prices, Wells Fargo analysts warned. Canada and Mexico are considered top exporters of automotive parts and vehicles to the U.S.
Prices for U.S.-made automobiles could rise as much as $2,100 if the tariffs are imposed, Fortune first reported. Additionally, vehicles manufactured completely in Canada and Mexico may cost as much as $8,000 to $10,000 more.
Hardest hit companies include some of the biggest U.S carmakers — General Motors (GM), Ford, and Stellantis. All three have manufacturing plants in Mexico and Canada and could stand to lose between $5 to $9 billion.
Some GM vehicles manufactured in Mexico include the Chevrolet Blazer, Chevy Equinox, and Cadillac Optiq, all made in the Ramos Arizpe plant. There’s also the Chevy Equinox EV.
As Kiplinger reported, electric vehicles may also be hit by a separate Trump policy that aims to eliminate up to $7,500 federal tax credit for EV purchases.
Gas prices to rise
Prices as the gas pump may also rise more than expected if tariffs are imposed.
Canada is a main source of crude oil imports and industrial supplies like steel for the United States. More than 71% of U.S. crude oil imports were supplied by Canada and Mexico in 2023, according to a new report from the Congressional Budget Office (CBO). Of that share, 60% of oil came from Canada.
The steep 25% tariffs would impact consumer prices for gasoline, diesel fuel, and other petroleum products across the country. Some states will be more affected than others by tariffs, mainly the Midwest.
That’s bad news, given that gas prices are already on the rise due to seasonal patterns, and are slated to reach $3.50 per gallon by spring.
The premier of Ontario, Doug Ford has been more forthcoming about the implications of Trump’s tariffs, noting that Canada won’t remain complacent.
“We will cut off energy down to Michigan, over to New York State, and over to Wisconsin,” Ford said in a report by the Associated Press. “I don’t want this to happen.”
Proposed tariffs would lead to higher inflation
If you were expecting inflation to go down, tariffs won’t be the solution.
A new Wells Fargo report found that imposing 25% tariffs on all imports from Mexico and Canada on February 1, would lead to retaliation and result in slower domestic growth for the U.S. and higher consumer prices.
Model simulations show that the annual rate of consumer price inflation would be half a percentage point higher by the year-end if Trump’s tariffs were enacted. By comparison, GDP growth would fall by a full percentage point relative to the expected baseline this year.
Bottom line: Are Trump’s tariffs a bluff?
Tariffs are set to be an overarching theme during the Trump administration’s second term, and economists warn it may have collateral damage on your wallet.
As reported by Kiplinger, prices of everyday goods will spike if steep tariffs are enacted. The U.S. imported nearly $500 billion worth of merchandise from Mexico, and $410 billion from Canada in the twelve months leading up to November 2024.
While Canada and Mexico account for just under 30% of all U.S. goods imports, its categories are crucial for the United States. Auto parts and manufactured vehicles, crude oil, and fresh foods and vegetables are some areas that may be hard hit by potential 25% tariffs.
Economists say Trump’s tariff proposal will ignite a trade war, which will cause U.S. consumer prices to increase and impact Canada and Mexico’s economies.
As reported, tariffs levied on foreign nations are paid by U.S. importers. That means a 25% tariff on Canadian goods will be paid by the U.S.-based importer, and that cost is generally passed to consumers like you so businesses can make a profit.
Already, CNN reports that economists at Goldman Sachs are calling Trump’s bluff. The U.S. Mexico-Canada Agreement (USMCA) is set to be reviewed next year, these tariff discussions may just speed up that timeline, they argue.
For now, all eyes are on the Trump administration as the 25% tariffs on Mexico and Canada are set for February 1, 2025. Stay informed, as these looming changes can impact your wallet.
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