What could get more expensive if Trump launches a new trade war with Mexico and Canada

CNN

By Elisabeth Buchwald, CNN

New York (CNN) — During President-elect Donald Trump’s first term, America launched an all-out trade war with China to boost US manufacturing, secure US national security interests and resolve what Trump believed was an extremely out-of-balance trade relationship.

President Joe Biden kept most of those tariffs in place and added a few new ones, too. While leaders of the two nations continue to butt heads, US consumers have paid the price, shelling out more money on goods imported from China.

Now Trump is focusing his attention on America’s largest and third-largest trading partners: Mexico and Canada. And he’s pledging something extraordinary: Come January 20, the day Trump is inaugurated, he pledged to slap a new 25% across-the-board tariff on all goods the US imports from the two nations – goods that are almost all coming across the border for free because of the Trump-negotiated US-Mexico-Canada Agreement, or USMCA.

Translation: Brace yourself for a potential trade war that could seriously lighten your wallet.

Here are some of the top consumer goods Americans buy from their neighbors to the north and south that could get more expensive if Trump follows through with his tariff plan:

Gas

Crude oil, which is refined to produce gasoline and heating oil, is one of the top imports to the US from Canada. In July it reached a record of 4.3 million barrels per day following the expansion of Canada’s Trans Mountain pipeline, according to data from the US Energy Information Administration.

The expansion has helped deliver more oil to be refined to much of the West Coast in addition to the Midwest, where it previously served most prominently.

“You can’t simply process different oil overnight. It would take investments/years. More US supply wouldn’t help,” Patrick De Haan, head of petroleum analysis at GasBuddy, said in a post on X.

The 25% tariff Trump floated would have “huge impacts” on gas prices, amounting to an increase between 25 cents to 75 cents per gallon, he said. That would most directly impact Americans located around the Great Lakes, Midwest and Rockies.

Trump has proposed ramping up American oil permit grants, but it would take time for that supply to come online to replace oil from Canada. And it’s unclear that US energy companies would want to produce significantly more oil – global demand is slowing, and profit from ramped-up drilling would be harder to come by.

Produce

As climate change has made growing conditions in parts of the United States less favorable, the US has grown increasingly reliant on Mexico for produce.

In 2022, the US imported $44.1 billion worth of agricultural products from Mexico, amounting to a fifth of all US agricultural products, according to Commerce Department data.

For example, 90% of the avocados Americans consumed in 2022 were imported. Of the avocados imported into the US, 89% came from Mexico. Said differently, your guac and avocado toast could skyrocket if 25% tariffs are levied on Mexico.

Cars

The United States imported $130 billion worth of vehicles from Mexico in 2023, making it the top good the US imports from there, according to the United Nations’ international trade database.

As more car manufacturers sought to get around tariffs imposed on Chinese goods, many moved their production to Mexico, making it a global hub for car factories, including General Motors, Ford, Stellantis and nearly a dozen more.

Virtually every American auto manufacturer depends on parts from Mexico to build its cars or trucks, because those parts can be substantially cheaper than those made in the US. But a 25% tariff would likely be a game changer there.

Bottom line: It’s going to hurt

The new round of tariffs Trump is prepared to impose comes as the US has grown increasingly reliant on imports from Mexico and Canada.

For the first time in more than two decades, Mexico overtook China as the top exporter of goods to the US last year, according to Commerce Department trade data. China is now the second top exporter of goods into the US, and trailing very close behind it is Canada. That’s a big shift from just two years ago, when China was the top exporter of goods into the US, and Canada and Mexico hardly came close to it.

This means that the new tariffs Trump pledged will be virtually inescapable for Americans as businesses are poised to pass along the higher costs they face as a result to consumers.

The-CNN-Wire
™ & © 2024 Cable News Network, Inc., a Warner Bros. Discovery Company. All rights reserved.

CNN’s John Towfighi contributed reporting.