If you’re concerned about how President Donald Trump’s new round of import tariffs will affect your finances in the weeks and months to come, you’re not alone. Millions of Americans are concerned about the same thing and interested in strategies that can help them transition as painlessly as possible.
But what are tariffs and how exactly do they affect everyday consumers?
Tariffs are taxes a government may impose on foreign goods for any number of reasons. These include the protection of local industries and retaliation against another nation’s unfair international trade practices. The general goal is to encourage consumers to forgo foreign goods in favor of buying domestic instead, as with the Trump tariffs on imports from China, Canada, and Mexico.
Tariff impacts naturally can and do have a noticeable economic impact on everyday life. However, developing a thorough understanding of how they work and what to expect can help. In this introduction to the topic, we’ll go over what you need to know as a consumer.
Impact on Consumer Prices
In 2024 alone, the United States did close to $2.2 trillion in international goods trade with the countries currently targeted with tariffs – Canada, Mexico, and China. When the new tariffs go into effect, we’re looking at a 25 percent increase on both Canadian and Mexican goods. The current 10 percent tariff on Chinese imports is also set to double to 20 percent.
Naturally, that’s going to affect consumer prices of many goods Americans currently rely on moving forward. Here are a few examples to know.
Vehicles and automotive parts
The automotive industry is one of the first expected to feel the pinch of the tariff impacts. Quite a few of the vehicles Americans drive are manufactured in Mexico or Canada. The same goes for a wide range of auto parts.
Production costs will rise for many vehicle brands as a result, with the average price of a new car to follow. In fact, consumers may see the price of some cars rise by up to $3,000.
China produces many of the electronics that are now everyday staples in most American households. Examples include smartphones, televisions, laptops, and many common home appliances.
As production costs rise, consumers should expect to see a portion of these costs passed on to them in the form of heftier price tags.
Food and drink
A large portion of America’s produce comes from Mexico, including everyday items like avocados, nuts, berries, and tomatoes. Meat, fish, and dairy may also rise as far as prices in the weeks and months to come. The same goes for popular items like imported Mexican beer.
Energy and lumber
Tariffs on Canadian energy will top out at 10 percent instead of the 25 percent impacting the rest of Canada’s goods. However, they will still likely lead to higher prices on products like gasoline. Canadian lumber prices will also probably rise, affecting what it costs to build or renovate homes and other buildings.
The effects on consumer prices will leave shoppers with a choice between paying more for foreign items they can’t do without and embracing domestic alternatives instead. An overall shift in buying patterns that favors American manufacturing is likely. However, higher prices associated with domestically made products may limit affordable options.
Benefits of Tariffs for Local Manufacturing
Of course, tariffs aren’t all doom and gloom. They also carry potential benefits for American manufacturing and many aspects of the economy, in general. Here’s a closer look at the potential positive economic impact we may also see.
Protection for “made in America” products
Buying products and using parts made in America helps support the domestic economy, ensure product safety, and raise standards across the board. However, cheaper foreign labor and supply costs often mean many manufacturers choose to go that route instead.
By raising the relative cost of falling back on foreign parts and products, tariffs can encourage consumers and companies alike to buy domestically instead.
Domestic job creation
If tariffs encourage fewer companies and businesses to rely on imports, domestic companies may experience increased demand. This can, in turn, create new jobs within certain sectors, including manufacturing.
Less competition can also benefit various domestic industries (e.g. steel manufacturing). Opportunities to expand or diversify may eventually present themselves, as well.
The Diverse Impacts of Tariffs
Tariff impacts can be diverse, resulting in a wide range of different possibilities, so it’s important to be prepared. In addition to possible benefits for the domestic economy, consumers should also prepare for the possibility of increased inflationary pressures if tariffs drive up prices. Supply chain disruptions are possible as companies make necessary adjustments to their manufacturing routines. Affected countries may potentially impose retaliatory tariffs of their own, which will affect American exporters and possibly international trade relations.
Navigating the shifting financial landscape
So what can you do as Trump’s new tariffs take effect and both companies and consumers adapt to the changes? Whether you’re a concerned consumer looking to minimize daily expenses or a business owner trying to make the best decisions possible for your company, a fresh round of thorough financial planning is an excellent place to start.
The seasoned financial experts of MyStages® are fully committed to helping people just like you successfully navigate their way through economic shifts, including those related to tariffs. Contact us today, and we’ll happily help you explore the various ways tariffs may affect your investments, consumer decisions, and other financial choices.
