During his presidential campaign, Donald Trump consistently threatened to introduce new tariffs. Upon taking office, he promised to enforce them on China, Canada, and Mexico starting February 1. Ultimately, he opted to delay the tariffs on Canada and Mexico by a month, citing “agreements” made at the last moment.
This week, however, the tariffs took effect, prompting all three countries to respond with their own tariffs. Canada and Mexico are facing tariffs of 25 percent, while the tariffs on Chinese goods have been increased from 10 to 20 percent. In retaliation, China has imposed tariffs of up to 15 percent on select American agricultural exports.
The newly implemented tariffs have triggered significant economic uncertainty, reflected in some negative stock market performances in recent days.
Is a Tariff Compromise on the Horizon?
In a Bloomberg Television interview on Wednesday, Secretary of Commerce Howard Lutnick suggested that a compromise regarding tariffs could be achievable, particularly concerning Canada and Mexico.
“Some categories may be exempted. This could include automobiles, among others,” Lutnick mentioned during the interview. He further noted that specific sectors demonstrating “compliance” might also be spared from tariffs.
He indicated that the White House would likely announce its new stance on Wednesday. However, according to Axios, Lutnick’s comments did little to reassure the markets. Although there was a late rally in the market on Tuesday, it shifted back into negative territory after Lutnick hinted that any relief might be only partial.
As a result, the stock market has reversed all gains made since Trump’s election last November.
Impact on American Households
A study released on Monday by the Budget Lab at Yale University explored the practical economic ramifications of the imposed tariffs.
The study categorized the tariffs as “equivalent to a 7 percentage point increase in the US effective tariff rate,” marking the highest since 1943. It forecasts an increase in prices by 1 to 1.2 percent, translating to an additional $1,600 to $2,000 per household.
Furthermore, the tariffs are predicted to reduce real GDP by 0.6 percent in 2025, with the burden of tariffs likely falling more on the poor than the wealthy due to their regressive nature.
Certain categories of products, such as electronics and clothing, are expected to be “disproportionately affected,” along with motor vehicles and food.
Electronics are projected to see a price hike of around 10 percent, with cars increasing by 6.1 percent and food prices by 1.7 percent.
Following an election where Trump capitalized on ongoing inflation, the Budget Lab’s findings suggest worsening conditions ahead rather than improvement.
Perspective from Canada and Mexico
A recent analysis by CNN highlighted that both Canada and Mexico have significant reasons to be concerned about a possible recession. While the US already feels the repercussions of the tariffs, Canada and Mexico stand to lose even more due to their economic dependence on the US.
“This is going to be tough,” Canadian Prime Minister Justin Trudeau remarked regarding the trade war’s impact on Canadian workers.
Similarly, Mexico’s economy risks suffering if American consumers reduce their purchases of Mexican goods.
Trump’s Address
In his Congressional address on Tuesday night, Trump discussed the trade war, declaring “now it’s our turn” after claiming that other nations have taken advantage of the US.
He stated that the tariffs “are about protecting the soul of our country,” also acknowledging the short-term challenges that he believes will ultimately be worthwhile.
“There’ll be a little disturbance,” said the president. “But we’re OK with that. It won’t be much.”
President-elect of the United States Donald Trump speaking with attendees at the 2024 AmericaFest at the Phoenix Convention Center in Phoenix, Arizona.
However, during the speech, Democrats shouted “stock market!” in response to the recent sluggish performance. The opposing party has announced plans to challenge and force a Senate vote, as expressed by Sen. Tim Kaine (D-VA) this week.
Author Information: Stephen Silver
Stephen Silver is an award-winning journalist, essayist, and film critic. He contributes to the Philadelphia Inquirer, the Jewish Telegraphic Agency, Broad Street Review, and Splice Today. As a co-founder of the Philadelphia Film Critics Circle, Stephen resides in suburban Philadelphia with his wife and two sons. Having authored thousands of articles for over a decade, he focuses on politics, technology, and the economy. Follow him on X (formerly Twitter) at @StephenSilver, and subscribe to his Substack newsletter.
