Deluge of Trump tariffs seen hitting household budgets
CONSUMER items ranging from avocados and strawberries to electronics and petrol look poised for price hikes in the wake of President Donald Trump’s tariffs on Mexico, Canada and China.
“The consumer will likely see some price increases over the next couple of days,” Target chief executive Brian Cornell said this week.
Fresh fruit and produce imported from Mexico during the winter months have a very short supply chain, Cornell told CNBC.
Of the agricultural products imported to the United States from Mexico in 2023, 72.5 per cent were fresh fruit and vegetables and beer and other alcohol, according to the US Department of Agriculture.
Yale University’s Budget Lab has estimated the net impact of Trump’s tariffs will be between a 1.0 per cent and 1.2 per cent hike to consumer prices, a yearly toll of US$1,600 to US$2,000 per household.
The Yale analysis takes into account 25 per cent tariffs on Canada and Mexico and 20 per cent tariffs on China. Canadian crude has a 10 per cent US tariff.
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The tariffs should also raise up to US$1.5 trillion for the US government in 2025, but the Budget Lab characterises the measures as regressive taxes because they hit low-income consumers disproportionately.
Recent surveys of shoppers point to a dip in consumer confidence, suggesting a possible pullback in spending.
“It is a highly dynamic situation,” said Corrie Sue Barry, CEO of electronics retailer Best Buy, who called price increases “highly likely.”
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Speaking on an earnings conference call, Barry pointed to “uncertainty about the duration, timing, amount and countries involved in addition to the potential action of others in the industry as well as the potential reaction of American consumers.”
Auto reprieve
Automobiles have been seen as among the most hard-hit industries from tariffs on Mexico and Canada because of the deep integration of supply chains across the region.
Trump’s tariffs have ignited anxiety throughout the industry.
Ford CEO Jim Farley said last month that Trump has promised a revival in US manufacturing but has so far produced “lot of cost and a lot of chaos.”
The tariffs could add between US$4,000 and US$10,000 per auto assembled in North America, according to an Anderson Economic Group analysis that excludes Trump’s tariffs on steel and aluminum.
The industry has warned of slowed investment.
“Automakers, battery makers and suppliers are investing billions in American manufacturing and to modernise the industrial base,” said John Bozzella, president of the Alliance for Automotive Innovation.
“This isn’t hypothetical. All automakers will be impacted by these tariffs on Canada and Mexico.”
Jessica Caldwell, head of insights at Edmunds, said the tariffs as proposed would profoundly affect the North American auto universe.
“If the tariffs do hold, the automotive industry won’t be able to adjust overnight,” she said. “There’s no escaping the fact that higher costs will ultimately be passed on to consumers.”
On Wednesday, the Whites House announced that it would allow a one-month exemption from tariffs on auto imports from Canada and Mexico.
Lumber, petrol
Petrol prices are also set to rise as a result of 10 per cent tariffs on Canadian crude. Prices at the pump could increase as much as 40 cents per gallon by mid-March, according to GasBuddy, a website for comparing prices.
The US aerospace and defense industries, which are major exporters, is “investigating mitigation strategies that would minimise the impacts of new tariffs on our industry,” said Dan Hardwick vice-president of international affairs for the Aerospace Industries Association.
The construction industry will also be affected by new 25 per cent tariffs on Canadian wood, on top of existing 14.5 per cent levies on some items.
More than 70 per cent of softwood lumber and gypsum, which is used for drywall, come from Canada and Mexico, said Carl Harris, immediately past chairman of the National Association of Homebuilders.
Home-improvement retailer Home Depot said a majority of its products are sourced from the United States, Canada and Mexico where the chain has stores.
“In general, any tariff would have a broad impact on our industry,” Home Depot said. AFP
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