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What Will Go Up in Price in the US If Trump Imposes Tariffs on Canadian and Mexican Goods

'22.01.2025'

ForumDaily New York

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US President Donald Trump intends to impose 1% tariffs on Mexican and Canadian goods from February 25. KWWL says that prices may go up.

Mexico and Canada are two of America's three largest trading partners. Together, they accounted for 30 percent of the value of all goods imported by the United States last year.

Although Tramp claims that foreign exporters will pay extra duties, and American consumers will have to foot part of the bill. Retailers are unlikely to cover the extra costs in full.

They have taken some preemptive steps to prevent prices from rising, stockpiling some goods and moving production away from countries that might be hit by new tariffs. But these measures can only protect consumers for so long. And many goods cannot be stockpiled or produced elsewhere.

Cars and car parts

Last year, the United States imported $87 billion worth of cars and $64 billion worth of auto parts from Mexico.

Cars were the second-largest item the U.S. imported from Canada last year, worth $34 billion.

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The auto sector would likely be "shocked" by potential new tariffs, said Mary Lovely, a senior fellow at the Peterson Institute for International Economics.

American auto companies were able to lower their production costs by hiring low-wage workers, especially in Mexico, where much of their production has moved in recent years.

Car manufacturers are unlikely to move their production elsewhere. They have invested heavily in existing factories in both countries. And it is very difficult to obtain all the raw materials for making cars and their parts from elsewhere.

Petrol

Last year, the United States imported $97 billion worth of oil and gasoline from Canada, the country's top export to the United States. The United States has become more dependent on Canadian oil since the expansion of the Trans Mountain pipeline.

A 25 percent tariff would raise the cost of gasoline for Americans by 25 to 75 cents per gallon.

Food and alcoholic drinks

Last year, the United States imported $46 billion worth of agricultural products from Mexico. In particular, fresh vegetables amounted to $8,3 billion, beer – to $5,9 billion, and strong alcoholic beverages – to $5 billion.

Constellation Brands imports Modelo and Corona beers and Casa Noble tequila from Mexico.

The company could face a 16% increase in costs due to the proposed Trump duties.

The retailer will have to raise prices by about 4,5%, said Chris Carey, an analyst at Wells Fargo.

But the single largest category of agricultural imports from Mexico last year was fresh fruit, which the U.S. imported $9 billion worth, with avocados accounting for $3,1 billion.

Now all of these products will cost consumers more. Grocers and farmers typically operate on very low profit margins compared to other industries. This gives them little leeway to absorb the higher costs. Instead, they will pass them on to consumers.

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