Higher tariffs, higher prices: What will cost more in the US?

Justin Trudeau and Donald Trump dined at Mar-a-Lago in November 2024 (Image credit: Justin Trudeau/X)

The latest round of tariffs imposed by the Trump administration on Canada and Mexico is set to drive up costs for American consumers across a wide range of products, from automobiles to avocados. With 25% duties slapped on most imports from these two key trading partners, industries and businesses are bracing for price hikes that will likely trickle down to consumers.

Automobiles and Auto Parts

The U.S. heavily relies on Canada and Mexico for its auto industry, importing $69 billion worth of cars and trucks from Mexico and $37 billion from Canada in 2023. Additionally, key auto components, such as engines for Ford’s F-Series trucks, come from Canada, while a significant portion of vehicle electronics originate from Mexico. The tariffs are expected to push up vehicle sticker prices by as much as $3,000 on average, according to TD Economics, at a time when the cost of new cars already hovers around $50,000.

Groceries: Avocados, Tomatoes, and More

Mexico is a major supplier of fresh produce to the U.S., accounting for 63% of vegetable imports and nearly half of all fruit and nut imports. A 25% tariff on these goods will likely make everyday staples like avocados, tomatoes, strawberries, and beef more expensive. With the Super Bowl around the corner, Americans could see a steep increase in guacamole prices. Grocery stores, which operate on thin margins, are expected to pass these costs onto consumers.

Energy and Gasoline

Although Canadian energy exports will face a lower 10% tariff, this still represents a notable increase from previous trade conditions. Canada supplies around 20% of the crude oil used in the U.S., meaning the tariffs could translate to an additional 30 to 40 cents per gallon at the pump. This would place further strain on consumers already dealing with volatile fuel prices.

Lumber and Housing Costs

Canada is a key source of construction materials for the U.S., supplying over 70% of imported softwood lumber and gypsum. The new tariffs could raise homebuilding costs, potentially driving up housing prices. Analysts suggest that while high mortgage rates may temper immediate demand, the long-term effects could make homeownership even less affordable.

Electronics and Appliances

Mexico is a leading supplier of electronic goods and machinery, with about half of its production in this sector destined for the U.S. The tariffs are expected to drive up prices for items like televisions, home appliances, and computing devices. With supply chains already facing pressure, consumers may see higher prices and delays for these essential goods.

Alcohol and Beverages

Mexican beer, tequila, and Canadian whiskey are also on the list of tariff-affected products. These beverages, popular among American consumers, could see noticeable price increases as importers and retailers adjust to higher costs.

The Broader Impact

While U.S. businesses will be forced to absorb some of the tariff burden, much of it is expected to be passed onto consumers. Additionally, Canada and Mexico may retaliate with tariffs of their own, further complicating trade dynamics and potentially leading to higher costs for a broader range of goods.

As markets brace for inflationary pressures and supply chain disruptions, the full impact of these tariffs remains to be seen. However, one thing is clear—American consumers should prepare to pay more for everyday essentials.

(With inputs from AFP)