Tractor trailers at the Ysleta-Zaragoza International Bridge port of entry, on the U.S.-Mexico border in Juarez, Chihuahua state, Mexico, on Dec. 20, 2024.
President Donald Trump signed orders on Saturday placing tariffs on Canada, China, and Mexico. Trump put a 25% tariff on imports from Canada and Mexico, and a lower 10% tariff on Canadian energy resources. He also implemented a 10% tariff on imports from China. There are no exemptions for specific industries.
The tariffs are expected to take effect on Tuesday. Trump’s order does not set a specific date when the tariffs would be lifted. Tariffs are likely to have a negative financial impact on U.S. consumers, economists said.
Households’ income after taxes would fall by $930 — just under 1% — in 2026 because of a 25% tariff on Canada and Mexico, according to a Tax Policy Center analysis published Friday. China, Mexico, and Canada are the three largest trading partners with the U.S., as measured by imported goods.
Tariffs are a tax on foreign imports. U.S. businesses that import goods pay that tax to the federal government. Many businesses will funnel those extra costs to customers — either directly or indirectly — which is why tariffs generally trigger higher prices for consumers, economists said.
Americans could also find they have fewer choices for brands and products stocked on store shelves, economists said. There are still many question marks over the looming tariffs on Canada, China, and Mexico.
Economic impact
The White House said tariffs and Trump’s broader economic agenda will benefit the U.S. economy. However, economists disagree. A 25% Canada-Mexico tariff and 10% China tariff would raise about $1.3 trillion in revenue through 2035 on a net basis, the Committee for a Responsible Federal Budget estimated. That revenue may be used to partially offset the cost of tax cuts, a package that might cost more than $5 trillion over 10 years.
However, a 10% additional tariff on China would shrink the U.S. economy by $55 billion during the Trump administration’s second term, assuming China retaliates with its own tariffs, according to an analysis by Warwick McKibbin and Marcus Noland, economists at the Peterson Institute for International Economics.
Tariffs on China would likely have the largest direct impact on consumers, as the bulk of what China exports to the U.S. is consumer goods such as apparel, toys, and electronics. Mexico and Canada tariffs would also “put upward pressure on food prices,” according to PIIE economists.
How tariffs may impact consumers
Consumers could pay for tariffs both directly and indirectly, economists said. Tariffs on China would likely have the largest direct impact on consumers, as the bulk of what China exports to the U.S. is consumer goods such as apparel, toys, and electronics.
China is the “dominant supplier” of toys and sports equipment to the U.S., and provides 40% of its footwear imports and 25% of its electronics and textiles, according to a recent analysis by PIIE economists. Mexico and Canada tariffs would also “put upward pressure on food prices,” according to PIIE economists.
The nations are “important sources” of vegetables, accounting for 47% of total U.S. imports, and prepared foodstuffs, 42%. Transportation equipment and machinery, electronics, and fuel are other sectors that stand to be most affected, they found.
Indirectly, U.S. producers might raise their prices because they face less foreign competition for certain goods, Lydia Cox, an assistant professor of economics at the University of Wisconsin-Madison, said during a recent webinar. U.S. companies that use tariffed goods to manufacture their products might also raise prices for downstream goods, Cox said.
For example, steel tariffs might lead to higher prices for cars, heavy machinery, and other products that use steel.
