On Saturday, President Trump signed an order enforcing tariffs on imports from Canada, Mexico, and China, the U.S.’s three largest product suppliers. The order establishes 25% tariffs on goods from Mexico and Canada, and 10% tariffs on goods from China. Although the tariffs on Canada and Mexico have been delayed by a month, the tariff on China went into effect on Tuesday.
Supporters of the tariffs argue that they protect Americans against the threat of unauthorized immigration and deadly drugs. They are being used to incentivize border countries to crack down on both of these issues. BBC News reports that this could lead to a reduction of fentanyl coming into the U.S., a drug responsible for tens of thousands of overdose deaths annually.
Trump also intends to use tariffs as a way to boost American manufacturing in order to make the U.S. self-sufficient in production once again. By making foreign goods more expensive, the tariffs are designed to encourage U.S. consumers to buy domestically made products.
Moreover, Trump hopes to address what he describes as unfair trade practices. By encouraging U.S. businesses to grow, he believes the U.S. will gain more influence in international trade organizations, enabling the negotiation of more favorable agreements with other countries.
On the opposing side, Canada, Mexico and China account for almost half of U.S. trade, leading some to argue that these tariffs could disrupt trade relations with these countries. They may view tariffs as a form of economic aggression, which could lead to reduced willingness to assist the U.S. on future issues.
Furthermore, tariffs raise the prices of all goods because the foreign products that once competed in our domestic market are now more expensive. This allows domestic producers to raise their prices as well, even though their production costs haven’t increased, allowing them to achieve higher profit margins.
In simpler terms, assume a drink at Starbucks in the Market Square location costs $2 to make, and Starbucks charges $5, so they make a profit of $3. Since most coffee is imported from abroad, Trump’s tariffs would mean the coffee could now cost $4. If Starbucks kept the price at $5, their profit would drop to $1. To compensate, Starbucks might raise the price to maintain their profit margins, meaning students might end up spending $8 instead of $5 for their favorite drink.
All things considered, tariffs will shift the burden of rising costs onto consumers, making it even harder to manage inflation. However, the tariffs are expected to make a drastic change in national security and make America nearly self-reliant in producing goods.
