It’s T Day

The Trump administration’s 25% tariffs on goods from Canada and Mexico, and additional 10% tariff on Chinese products, officially took effect this morning, after President Trump declared there’s “no room left” for negotiations.

How we got here: The tariffs were first announced in early February, with Trump framing them as a way of forcing Canada, China, and Mexico to prevent “the major threat of illegal aliens and deadly drugs killing our Citizens, including fentanyl.”

• The Canada and Mexico tariffs soon received a 30-day pause after the two countries agreed to help address fentanyl-smuggling and migration.
• However, the Trump administration has reportedly been dissatisfied with progress regarding drug-smuggling in recent weeks.

The impact

Canada, Mexico, and China are America's top-three largest trading partners, accounting for 42% of total US imports last year ($1.2+ trillion combined). They also serve as essential suppliers for many domestic industries.

A few examples:

• Food: Mexico is the largest supplier of fruit and vegetables to the US, while Canada leads in exports of grain, livestock/meats, poultry and more. In particular, the tariffs are projected to raise US avocado prices by ~20%.
• Automotive: 20+% of all cars and light trucks sold in the US were built in Canada or Mexico. The new tariffs on those countries are projected to drive up US car prices by as much as $12,000.
• Consumer electronics: An additional 10% tariff on China – the largest importer of electronics into the US – is expected to increase domestic prices for smartphones (+7%), laptops (+7%), and video game consoles (+10%).

Overall, the tariffs are projected to raise US prices by 1.0%-1.2%, resulting in consumers losing $1,600-$2,000 per household, per The Budget Lab at Yale.

👀 Looking ahead…It’s unclear how long the Trump administration’s tariffs will remain in effect as negotiations with Canada, Mexico, and China continue. And more tariffs are on the docket: President Trump confirmed yesterday that reciprocal US tariffs will start April 2 and apply to every country that taxes imports from America (including a 25% tariff on European countries).