How will Trump's tariffs impact US businesses and consumers?

US President Donald Trump’s long-threatened tariffs are here, plunging the country into an escalating trade war with China, Canada and Mexico.

Trump’s 25 per cent tariffs on imports from Canada and Mexico went into effect Tuesday (March 4), along with a heightened 20 per cent levy on Chinese goods. In response, all three countries announced retaliatory measures.

Experts say consumers and businesses will be the hardest hit. Companies big and small will face higher costs on the goods they buy from other countries — and could have little recourse but to hike prices themselves. For consumers, that will likely mean more expensive price tags on everything from cars, appliances and other big-ticket items to smaller, everyday purchases including electronics, gasoline and groceries.

What measures have Canada, Mexico and China taken?

Canada, Mexico and China all declared on Tuesday (March 4) that they would impose retaliatory taxes on many US products.

China is imposing tariffs of up to 15 per cent on a wide array of key US farm exports, including American-grown chicken, pork, soy and beef. It also expanded the number of US companies subject to export controls and other restrictions by about two dozen.

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Meanwhile, Canadian Prime Minister Justin Trudeau announced that his country would slap tariffs on more than $100 billion of American goods over the course of 21 days. And Mexican President Claudia Sheinbaum said her country will respond with its own retaliatory tariffs on US goods. Unlike Canada or China, however, she said she would not announce specific tariffs until Sunday (March 8) — possibly indicating that Mexico still hopes to de-escalate the trade war.

“All of the economies involved in the tariffs will see a loss in their real GDP (gross domestic product) and increasing consumer prices in general,” said Wendong Zhang, an assistant professor of applied economics and policy at Cornell University.

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Canada and Mexico will suffer considerably more than the US because of the US economy’s size and strengthening dollar, Zhang added. For the US, the combined tariffs on China, Canada and Mexico could result in about a 0.4 per cent GDP loss, amounting to over $100 billion, he said.

The tariffs may be short-lived if the US economy suffers. But Trump could also impose more tariffs on additional countries such as India or EU nations, and more products such as computer chips and pharmaceutical drugs. The president has injected a disorienting and unpredictable volatility into the world economy, leaving it off-balance as people wonder what he will do next.

How will tariffs affect US businesses?

Manufacturing companies and retailers for a wide array of goods will feel the impact.

“International trade is critically important to our business and industry,” Best Buy CEO Corie Barry said on an earnings call Tuesday. “The consumer electronics supply chain is highly global, technical and complex. China and Mexico remain the No. 1 and No. 2 sources for products we sell, respectively.”

At Target, sales and profits slipped during the crucial holiday quarter as customers held back on spending, and there will be “meaningful pressure” on the company’s profits in early 2025 because of the tariffs and other costs, CEO Brian Cornell said at the company’s annual investor meeting Tuesday.

Car companies’ supply chains that cross the borders of the US, Canada and Mexico could be disrupted — in addition to auto parts that come from China.

How will the tariffs impact consumers in the US?

Tariffs on China could impact a variety of consumer products, including cell phones, children’s toys and clothing that Americans buy every day.

Some companies have been working to delay or lessen the blow on consumers by stockpiling what they can or shifting manufacturing and suppliers back to the US or other countries not impacted by the new levies.

Still, it’s easier to stock up on some goods than others. And even some “made-in-USA” products may contain plastics or packaging from China, for example. Wider supply chain shifts are also complicated and far from easy to carry out.

When it comes to consumer electronics, “We expect our vendors across our entire assortment will pass along some level of tariff costs to retailers, making price increases for American consumers highly likely,” Best Buy’s Barry said.

And with the US spending billions on fruits and vegetables imported from Mexico and Canada each year, shoppers could face additional sticker shock in the grocery aisle. The new tariffs could also hike prices of tequila, mezcal, whiskey and other spirits made in those countries.

Tariffs add another “mental calculus” for consumers on top of other price pressures today — such as soaring egg prices due to avian flu, Zhang says. He adds that shoppers will need to watch prices for everyday items more closely.

When will customers see prices go up?

Exactly when consumers will see prices rise isn’t clear, but perishables will likely get hit first.

Especially during colder months, retailers rely on foreign imports for fresh fruit and vegetables, and long-term storage isn’t an option. Shoppers could start seeing the prices of produce such as avocados, which come from Mexico, go up industry wide as early as in a few days, Target’s Cornell told reporters on Tuesday.

But he added that the extent to which prices will increase depends on how things play out over the next few weeks.

“I think things are unfolding so quickly,” Cornell said. “We will watch this carefully and understand, are these long-term tariffs? Is this a short-term action? How will this unfold over time? I think all of us are speculating, and I think we’re going to listen and learn and make sure that we can control the things we can control. But we don’t want to overreact right now to one day and one headline.”