What Trump’s new tariff threats mean for the US economy

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Subscribe to enjoy similar stories. The stiff duties that President-elect Donald Trump threatened against the U.S.’s neighbors and big trading partners, along with the additional tariffs he promised against China, could raise prices for Americans on everything from fresh fruit from Mexico to lumber from Canada and Chinese electronics. Import-reliant businesses—especially automobile manufacturers—could face significantly higher costs that they would then pass on to consumers.

Farmers and other exporters could face retaliatory tariffs. Trump’s promise to impose 25% tariffs on Canada and Mexico and an additional 10% on Chinese imports on the first day of his presidency could lead to higher prices, just as the country appears to be turning a corner on inflation. Many Americans said they voted for Trump precisely because of brutal price increases they blamed on the Biden administration.

The tariff threat upends the forecasts of many economists who have been assuming that the duties Trump will impose wouldn’t be nearly as high as what he pledged on the campaign trail. Whether a negotiating tactic or an opening salvo in a bid to rework global trade, Trump’s tariff threat represents a ratcheting up of his rhetoric. On Tuesday, economists at the Budget Lab at Yale reworked their estimates of how tariffs under Trump might affect the economy.

Tariffs of 25% on Canada and Mexico, and 10 percentage points added to existing tariffs on China, with those countries imposing retaliatory tariffs, would raise U.S. consumer prices by 0.75% next year, according to the Budget Lab. That estimate drops to 0.65% if households substitute purchases toward domestically produced or lower-tariff imported options.