Tariffs rarely make big news. At any given time, there are thousands of different ones on products, raw materials, and other goods enacted by countries on their trading partners for a variety of reasons.
However, President Donald Trump has brought tariffs into the spotlight, promoting them heavily as a stick he can use to win trade concessions both from U.S. antagonists such as China and longtime allies such as Canada.
The result of those increased tariffs, of course, will be higher prices for U.S. companies that import goods from the penalized countries, says Melissa Harrington, sales director for Descartes Systems Group, a logistics and supply chain tech business based in Toronto. The company describes Harrington as having "a strong background in international trade as it relates to both imports into the U.S. and Canada, as well as U.S. export regulations."
Harrington answered questions from The Motley Fool via email on how these new tariffs will impact Americans, and which U.S. industries will be impacted the most.
China is only one nation the U.S. has targeted on trade. Image source: Getty Images.
What will tariffs mean for consumers?
Tariffs are added fees that companies must pay to import specific goods from certain countries. For example, Trump wants a 25% on steel and a 10% tariff on aluminum brought into the U.S. from sources including China, Canada, and the European Union. And if you think that anything that boosts the prices of raw materials will result in those costs being passed all the way down the line to consumers, you're essentially right.
"Generally, yes, tariffs raise prices for consumers," she wrote. "It depends on the industry and the competitive market both globally and domestically to say for sure and how much. Countries usually only raise tariffs to protect the domestic industry/jobs, national security, and an infant industry." In this case, however, Trump is using tariffs as primarily a negotiation tool.
But beyond the impact of making imports more expensive, Harrington notes that our trading partners are likely to retaliate with tariffs of their own on U.S. exports. And she expects these moves will take a particularly heavy toll on the American farmer.
"Most U.S. agriculture is exported to Mexico, Canada, and Southeast Asia," she wrote. "If we impose tariffs on these regions/nations, they are likely going to hit back with a tariff against our farming and agriculture exports which would, in turn, cause them to import less of these products, hurting our domestic farming/agriculture industry."
What happens next?
"Tariffs have a 'trickle-down effect,'" notes Harrington. "This is not a cost the importer or corporation typically just absorbs; it's generally passed down to consumers. So as tariffs increase on your favorite items (or on the materials that go into that finished item), I'd expect to see that, over time, consumer prices would also increase."
There is still the possibility that all of these conflicts will be settled at the bargaining table, the result the president seems to be angling for. That may not seem likely as rhetoric heats up between Trump and foreign leaders. Still, tit-for-tat tariffs cause economic pain on both sides. That prospect could force at least some of the nations involved to rapidly work out new trade deals with the Trump White House, but there's no guarantee these threats won't escalate into a wider, and longer-term, trade war.
