President-elect Donald Trump threatened on Monday to impose sweeping new tariffs on Mexico, Canada and China as soon as he takes office as part of his effort to crack down on illegal immigration and drugs. He said he would impose a 25% tax on all products entering the country from Canada and Mexico, and an additional 10% tariff on goods from China as one of his first executive orders.
The tariffs, if implemented, could dramatically raise prices for American consumers on everything from gas and automobiles to agricultural products. The U.S. is the largest importer of goods in the world, with Mexico, China and Canada its top three suppliers, according to the most recent U.S. Census Bureau data.
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Trump made the threats in a pair of posts on his Truth Social site in which he railed against an influx of illegal migrants, even though southern border apprehensions have been hovering near four-year lows.
“On January 20th, as one of my many first Executive Orders, I will sign all necessary documents to charge Mexico and Canada a 25% Tariff on ALL products coming into the United States, and its ridiculous Open Borders," he wrote, complaining that "thousands of people are pouring through Mexico and Canada, bringing Crime and Drugs at levels never seen before,” even though violent crime is down from pandemic highs.
What are tariffs?
In layman’s terms, they are taxes on imported goods that importers need to pay. Many times, to offset the cost, companies will pass the increase on to the consumer through higher prices.
“Usually, importers don’t have huge profit margins where they can absorb the tax themselves and keep the price to U.S. consumers the same,” said Doug Irwin, professor of economics at Dartmouth.
Tariffs were one of the first taxes implemented in the U.S., and from its founding until 1914, they were the main source of revenue for the federal government.
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After World War 2, the U.S. and more than 20 other countries wanted to promote international trade by joining the General Agreement on Tariffs and Trade. The accord's goal was to lower tariffs and promote free trade globally. It turned the tax from a revenue source to a bargaining chip that administrations didn't often use until Trump’s first presidency, when he placed nearly $80 billion on Chinese imports in 2018, sparking a trade war.
According to the Tax Foundation, the move lowered the gross domestic product of the U.S. by 0.2% and employment by 142,000. The analysis of the policy also found taxes for the average U.S. household increased by $200 to $300 annually.
“Tariffs can be used either as a carrot or a stick,” Irwin said. “That’s what sometimes President Trump seems to imply, that we’re going to raise tariffs so we can negotiate them back down.”
"Both Mexico and Canada have the absolute right and power to easily solve this long simmering problem. We hereby demand that they use this power," he went on, “and until such time that they do, it is time for them to pay a very big price!” Trump posted on Truth Social.
Trump also turned his ire on China, saying he has “had many talks with China about the massive amounts of drugs, in particular fentanyl, being sent into the United States, but to no avail."
“Until such time as they stop, we will be charging China an additional 10% Tariff, above any additional Tariffs, on all of their many products coming into the United States of America,” he wrote.
It is unclear whether Trump will actually go through with the threats or if he is using them as a negotiating tactic before he returns to the White House in the new year.
The Biden administration has kept many Trump-era tariffs against China in place while placing new ones as well.
