The new American government has promised to slap tariffs as high as 100% on some goods from certain countries. The premise was to act tit for tat and try to lower America’s incredibly high trade deficit since many countries slap high tariffs on American goods. But will the move backfire and worsen already high inflation in America? That’s what this article will attempt to explain.
While domestic businesses and enterprises may be motivated to ramp up production of domestically made and marketed goods, the American consumer will suffer with substantially higher-priced goods and services.
China is a Manufacturer to the World
Yes, almost everything you buy in stores like Walmart, Lowes, and even Macys’ is made in China. China is the world’s manufacturer. So, the new American government’s 10% tariffs on Chinese goods may make over $450 billion in imports much more expensive for already cash-strapped Americans. The new administration is rapidly expanding the number of items that will have tariffs imposed on them:
- Footwear
- Toys
- Video game consoles
- Electronics
- Many components needed to manufacture various goods.
- Machinery and equipment for various types of manufacturing.
As an American taxpayer, you’ll that your tax bill will increase by $172 and that’s just from tariffs imposed on China. Expect anything made by Apple to cost exponentially more as well. So, your new iPhone or iPad could cost almost $2,000. However, many big corporations may choose to accelerate the already popular trend of the China+1 strategy or move manufacturing out of China.
Other corporations will choose to pay the cost of the tariffs themselves instead of passing them on to you in the form of higher prices for what you buy in stores. So, your wallet may not be as severely impacted by tariffs in the short term.
But that has other negative implications because paying extra tariffs will hurt big companies’ profit margins. That means they won’t be able to pour money into higher salaries for workers, R&D, investment, and long-term expansion. So, Americans will be negatively impacted at two ends by the tariffs.
Exports to China will suffer since the Chinese government has retaliated by slapping a 15% tariff on coal and liquid natural gas from America. American oil will now be 10% more expensive for Chinese because of tariffs.
And it Doesn’t Stop There!
The American government plans to slap tariffs as high as 25% on goods from Canada and Mexico. That will hit your and the average American’s wallet much harder since America imports many more goods from these two nations. For example, almost 66% of all vegetable imports are from Mexico. About half of the nuts and fruits that America imports come from Mexico.
So, if you were complaining about seemingly unbearably high grocery prices, wait until you shop for food at your local grocery store this spring and summer. Tomatoes, raspberries, bell peppers, strawberries, and avocados will all cost more from now on. And so will many items at most restaurants since they’re made using food imported from Mexico.
America imports food that it can’t grow during the winter from Mexico. So, expect to see fewer and higher-priced items in the fruit and vegetable isles in grocery stores during the wintertime.
Driving Will Become Much More Expensive
That’s because most car parts come from Canada and Mexico. Also, most cars are at least partially assembled in these two countries before hitting dealerships and showrooms in America. Expect to see the prices of imported cars jump up dramatically. Also, the cost of domestically made cars will increase moderately because of the tariffs.
The average car – new or used – would cost an average of $2,700 more. Gas prices may skyrocket in some parts of America, especially in the Midwest and Mountainous regions. These two regions import all of their oil and natural gas from Canada. The refineries in these areas are designed to process heavier Canadian oil. It would take substantial investment, resources, and time to adapt them to lighter American oil.
Expect gas prices at the pumps to increase more than a bit because of the tariffs.
Housing Prices Will Climb Even More
It isn’t just your imagination. America has a real housing shortage. This has been the case since the pandemic. The pandemic dramatically raised construction costs by disrupting global supply chains and lines. Tariffs on Canadian and Mexican raw materials and raw materials from other nations will just make raw materials even more expensive. That will drive construction costs up even more.
However, the fact that the American lumber industry can supply up to 95% of the demand for wood needed for construction may bring housing prices down a bit, but not by much.
The Average American Will Suffer
Yes, you and your fellow countrymen will suffer because of your government’s tariffs. You’ll be paying more in taxes and more for already expensive goods and services. Perhaps Americans will respond by voting a more reasonable government into power in 2028.
