US President elect Trump recently threatened to impose a 25% tariff on all products from Mexico and Canada entering the United States through an executive order on his first day in office next year. In addition, Trump has threatened to impose a 10% tariff on all goods imported from China.
Although the feasibility and legality of Trump's proposal are not clear, if implemented, the proposed tariff may affect various goods used by Americans in daily life. Analysts generally believe that this may increase the prices of various commodities that Americans rely on, from clothing and footwear to computers and video games.
John David Rainey, the chief financial officer of Wal Mart, the largest retailer in the United States, said last week that if the tariff proposed by Trump came into effect, it might have to raise the price of some goods.
We never wanted to raise prices, "he said at the time." Our model is daily low prices. But consumers may face price increases. It's too early to say which products will rise due to tariffs
Which products will increase in price
The United States Census Bureau reports that in 2023, the United States will import a total of about 1.3 trillion dollars of goods from China, Mexico and Canada. What investors are currently most concerned about is which commodities will be most affected and most likely to rise in price if Trump's plan is implemented.
According to research, the three major categories of oil, electronics, and automobiles will be most affected by tariffs.
Specifically, in 2023, the United States will import over $92 billion worth of crude oil, approximately $34 billion worth of passenger cars, and nearly $9 billion worth of natural gas from Canada.
This year, the United States imported over $65 billion worth of automotive parts from Mexico, as well as approximately $26 billion worth of computer equipment, nearly $20 billion worth of crude oil, and nearly $14 billion worth of medical equipment.
At the same time, China is a major supplier of electronic products to the United States. Data shows that in 2023, the United States imported nearly $67 billion worth of mobile phones and other household items, over $37 billion worth of computer equipment, and over $32 billion worth of games, toys, and sports equipment from China.
There is still room for maneuver
Kaitou Macro stated that Trump's new tariff threat may only be a negotiating tool.
Economist Stephen Brown of the company stated in a report on Tuesday that these tariffs are aimed at forcing target countries to make concessions in drug smuggling and illegal border crossing, which means that the targeted countries may be able to prevent these actions.
He wrote, "This seems to mean that these countries can avoid these tariffs by proposing credible plans, taking action to reduce drug smuggling or ensure border security, just like Mexico avoided similar threats from Trump in 2019
Ultimately, working with Trump through promises of cooperation rather than threats of retaliation is in the best interest of all countries, "he added.
Market commentators have also repeatedly warned that imposing comprehensive tariffs on the United States' largest trading partner is likely to trigger an inflationary rebound.
Dave Grecsek, Managing Director of Aspiriant, an independent wealth management company, stated that the one-time impact of the proposed tariffs "could potentially increase core inflation rates by 0.5% to 1% by 2025.
This is not the end of the world, but given that the total price is already 20% to 30% higher than before the pandemic, this definitely won't be a popular development, "he said.
In addition, Trump's plan may also raise legal issues. Former Mexican Ambassador to the United States Arturo Sarukh á n wrote in an article on X that tariffs would violate the United States Mexico Canada Agreement (USMCA), a free trade agreement negotiated by Trump during his first term that came into effect in July 2020.
Therefore, at this point, Trump's proposal may still change. In his first term in 2019, Trump announced new tariffs on Mexico aimed at strengthening the border, but he withdrew the plan amid criticism from lawmakers, including some Republicans.