NEW YORK (AP) — U.S. 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% tariffs on imports from Canada and Mexico went into effect Tuesday, along with a heightened 20% 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.
How are Canada, Mexico and China responding?
Canada, Mexico and China all declared on Tuesday that they would impose retaliatory taxes on many U.S. products.
China is imposing tariffs of up to 15% on a wide array of key U.S. farm exports, including American-grown chicken, pork, soy and beef. It also expanded the number of U.S. companies subject to export controls and other restrictions by about two dozen.
This combination of file photos shows, from left, U.S. President Donald Trump in Palm Beach, Fla., Feb. 7, 2025, Canadian Prime Minister Justin Trudeau in Kyiv, Ukraine, June 10, 2023, China’s President Xi Jinping in Brasilia, Brazil, Nov. 20, 2024, and Mexico’s President Claudia Sheinbaum in Mexico City, June 27, 2024. (AP Photo)
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 U.S. goods. Unlike Canada or China, however, she said she would not announce specific tariffs until Sunday — 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.
Canada and Mexico will suffer considerably more than the U.S. because of the U.S. economy’s size and strengthening dollar, Zhang added. For the U.S., the combined tariffs on China, Canada and Mexico could result in about a 0.4% GDP loss, amounting to over $100 billion, he said.
The tariffs may be short-lived if the U.S. 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.
What is the impact on 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 U.S., Canada and Mexico could be disrupted — in addition to auto parts that come from China.
What impact will the tariffs have
on consumers?
Tariffs on China could impact a variety of consumer products, including cellphones, 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 U.S. 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 U.S. 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 industrywide 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.”
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Associated Press writers Anne D’Innocenzio in New York and Paul Wiseman in Washington, D.C., contributed to this report.