As President Donald Trump’s tariffs on imports from Canada, Mexico, and China come into effect, U.S. businesses are gearing up for an economic shakeup. The levies, which impose a 25% tax on Canadian and Mexican goods and a 10% tax on Chinese products, are expected to affect a wide range of sectors across the country.
Impact on American households and businesses
The Budget Lab at Yale University has projected that these tariffs could cost the average American household between $1,000 and $1,200 annually in purchasing power. Gregory Daco, chief economist at EY, warns that the increased import costs may push inflation, currently at a 2.9% annual rate, up by 0.4 percentage points this year. Daco further predicts a significant slowdown in the economy, forecasting a decrease of 1.5% in 2023 and 2.1% by 2026 as consumer spending and business investments decline.
Local businesses are already feeling the pinch. For instance, Zach Davis, co-owner of Penny Ice Creamery in Santa Cruz, California, has been compelled to raise prices on popular flavors like “strawberry pink peppercorn” and “chocolate caramel sea salt.” He notes, “I feel bad about always having to raise prices. We were looking forward to inflation coming down, the economy stabilising in 2025 … Now with the tariffs, we may be back at it again.” Davis fears that the tariffs will also inflate the costs of essential equipment, such as refrigerators and blenders, which are primarily sourced from China.
Challenges across various sectors
The ripple effects of these tariffs extend beyond the ice cream business. In Asheville, North Carolina, Casey Hite, CEO of Aeroflow Health, is concerned about the impact on his company, which relies heavily on supplies from China, including breast pumps. Hite explained that the new import taxes might compel his company to either opt for cheaper and possibly inferior products or increase health insurance premiums, ultimately burdening consumers.
“It will impact the patients,” Hite stated. “In time, patients pay more for the products.”
Moreover, industries that cannot stockpile goods, like supermarkets, will feel immediate effects as fresh produce has a limited shelf life. William Reinsch, a former U.S. trade official, highlighted that items such as avocados and cut flowers cannot be stored, meaning the tariff implications will quickly reach grocery shelves.
Rod Sbragia, a produce vendor in Nogales, Arizona, expresses concern that the new import levies might drive some distribution companies out of business, thus limiting consumer choices. Sbragia, a longtime Trump supporter, questions the administration’s strategy, saying, “When we’re worried about cost to consumers, inflationary pressures and the overall health of our population, why are we going to make it more difficult to get access to fresh fruits and vegetables?”
American farmers also face uncertainty as they might become collateral damage in the ongoing trade disputes. The potential for retaliatory tariffs on agricultural products like soybeans and pork looms large, a scenario reminiscent of Trump’s first term. Farmers are now looking to the administration for assurances of protection against these retaliatory measures.
“The Trump administration provided a safety net,” remarked Lee Wicker, deputy director of the North Carolina Growers Association. Many farmers, he noted, are hopeful that Trump will support them in the face of potential trade repercussions.