The Impact of Trump's Proposed Tariffs on Consumers and Businesses

During her 2024 presidential campaign, Vice President Kamala Harris raised concerns about the tariffs proposed by Donald Trump. She warned that these tariffs would likely lead to significantly higher prices for consumers, effectively acting as a tough new "sales tax on the American people."

Despite her warnings, President-elect Trump won the election by a narrow margin, defeating Harris by approximately 1.4 to 1.5 percent in the popular vote, according to the Cook Political Report. Following his victory, Trump reaffirmed his commitment to implementing tariffs, promising to introduce a 25 percent across-the-board tariff on all goods entering the United States from Canada and Mexico.

An analysis published in an article on December 3 has provided insights into the "devastating" consequences these tariffs could have on American consumers and businesses.

The piece emphasizes that if Trump goes ahead with tariffs on neighboring countries, the repercussions for American companies could be severe. Many well-known businesses, including Whirlpool and Mattel, which manufactures Barbie dolls, operate factories in Mexico. Notably, about 60% of aluminum and a quarter of steel imports in the U.S. originate from Canada, along with significant amounts of steel from Mexico. A report from Citigroup anticipates that Trump's proposed tariffs could increase the price of steel for U.S. manufacturers by 15-20 percent.

American car manufacturers are expected to be among the hardest hit. For instance, General Motors imports more than half of the pickups it sells in the U.S. from Mexico and Canada. Furthermore, approximately 9% of the parts used in American-produced cars come from these two countries. According to Nomura, another financial institution, Trump's tariffs from late November could reduce General Motors' operating profits by as much as 80% in the following year. Foreign carmakers, including Toyota, would also face significant challenges.

The article outlines three potential strategies that businesses might adopt in response to these tariffs.

The first approach is to stockpile goods. Companies such as Microsoft, Dell, and HP are reportedly increasing their imports of electronic components before the new administration takes office in January. However, this strategy has its limitations. The second approach involves businesses passing on the added costs of tariffs to their customers by raising prices.

Further, companies like Stanley Black & Decker and Walmart, the largest retailer in America by sales, have indicated that they may have to implement price increases due to the tariffs. The third and perhaps most challenging response would be to reconfigure supply chains. Finding new suppliers requires validation and negotiation, a process that could take several years to complete.

In conclusion, the potential imposition of Trump's tariffs could create significant economic challenges for both American consumers and businesses, resulting in higher prices and reduced profits for many sectors.

tariffs, economy, business