- President Trump has introduced his America First Trade Policy, which is expected to include tariffs.
- The 47th president suggested that Canada and Mexico could be hit with a 25% tariff by Feb. 1.
- Although Trump claims foreign countries will pay, importers will likely pass costs to consumers.
President Trump is back in the White House and that means tariffs are almost certain, even though he doesn’t appear to know how they work. That’s alarming, but it didn’t stop the commander-in-chief from mentioning them in his inaugural address.
Speaking yesterday, Trump said “I will immediately begin the overhaul of our trade system to protect American workers and families. Instead of taxing our citizens to enrich other countries, we will tariff and tax foreign countries to enrich our citizens.”
More: Tariffs Could Add $3,000 To Cheap Cars, Slamming Budget Buyers
Of course, that’s not how tariffs work. As PBS noted last year, tariffs are paid by importers, which would be American companies in this case. Those firms are then likely to pass on the higher costs to consumers. So while additional money would go to the government, it’d most likely be coming out of your wallet one way or another.
However, Trump mentioned a new “External Revenue Service” which would “collect all tariffs, duties, and revenues.” He went on to claim there would be “massive amounts of money pouring into our Treasury, coming from foreign sources.”
Later in the day, Trump laid out his America First Trade Policy. It calls on the Secretary of Commerce, the Secretary of the Treasury, and the United States Trade Representative to “investigate the causes of our country’s large and persistent annual trade deficits … as well as the economic and national security implications and risks resulting from such deficits.” It goes on to call for recommendations such as a “global supplemental tariff or other policies, to remedy such deficits.”
Trump also wants to examine the feasibility of establishing the External Revenue Service as well as a review of existing trade agreements. He went on to call for an examination of export controls related to strategic adversaries and geopolitical rivals as well as an assortment of lesser things.
While a lot of this is laying the groundwork for future plans, Trump eventually suggested a 25% tariff could be slapped onto goods coming from Mexico and Canada.
According to Bloomberg, when asked by reporters on Monday night, Trump stated, “We’re thinking in terms of 25% on Mexico and Canada, because they’re allowing vast numbers of people. I think we’ll do it Feb. 1.”
Wolfe Research has previously suggested this could increase the cost of a new car by approximately $3,000.
While that’s just one way consumers could be hurt, CBC News reports that our neighbors to the North are ready to retaliate with “immediate tariffs” on $25.8 billion ($37 billion CAD) worth of American goods. If Trump refuses to back down, that figure could increase to $76.7 billion ($110 billion CAD) worth of goods.
Needless to say, the alarm bells are going off all over the world as companies fear the impact of tariffs. Consumers have also been put through the wringer with inflation and tariffs will only make things worse.
Of course, what Trump says and what Trump does are two separate things. As a result, only time will tell what happens.
