Analysis details 'devastating' effects Trump’s tariffs would have on businesses and consumers

04 December 2024

During her 2024 presidential campaign, Vice President Kamala Harris repeatedly warned that the tariffs Donald Trump was proposing would result in significantly higher prices for consumers and amount to a harsh new "sales tax on the American people."

Regardless, President-elect Trump enjoyed a narrow victory, defeating Harris by roughly 1.4 or 1.5 percent in the popular vote (according to Cook Political Report). And he doubled down on his tariffs proposal, promising to impose — as soon as he returns to the White House — 25 percent across-the-board tariffs on all products coming into the United States from Canada and Mexico.

In an article published on December 3, The Economist examines the "devasting" effects that Trump's tariffs will have on consumers and businesses if enacted.

"If Mr. Trump were to slap tariffs on America's northern and southern neighbors," The Economist warns, "the impact on American companies would be devastating. Businesses from Mattel, the maker of Barbie dolls, to Whirlpool, a home-appliance manufacturer, have factories in Mexico. Around three-fifths of America's imported aluminum and a quarter of its imported steel come from Canada, with large volumes of steel also flowing from Mexico. According to Citigroup, a bank, Mr. Trump's tariffs would raise the price of steel for American manufacturers by 15-20 percent."

The Economist continues, "Among the hardest hit by the tariffs would be American carmakers. General Motors, for example, imports over half of the pickups it sells in America from Mexico and Canada. About 9 percent of the value of parts for cars produced in America also comes from the two countries. According to Nomura, another bank, the tariffs proposed by Mr. Trump on November 25 would wipe four-fifths from the operating profit of General Motors next year. Foreign carmakers, such as Toyota, would also be hit."

Businesses, according to The Economist, "can respond to tariffs in three ways."

"The first is to stockpile goods," The Economist explains. "Microsoft, Dell and HP are among the American tech companies that are rushing to import as many electronic components as possible before the new administration takes office in January. Yet there are limits to that strategy…. The second option for companies is to pass tariffs on to customers by raising prices."

The Economist continues, "Several firms, including Stanley Black & Decker and Walmart, America's biggest retailer by sales, have already indicated that they may do so…. The third, and most difficult, response is to rewire supply chains. New suppliers, once found, have to be tested and negotiated with, a process that can take years."

Read The Economist's full report at this link (subscription required).

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