How Tariffs on Mexico, Canada, and China Could Impact Commodity Prices

A Yale analysis projects price increases on electronics, apparel, and cars.

By Jack Caporal – Updated Jan 22, 2026 at 4:15 PM EST | Fact-checked by Parker Hicks

Key Points

Tariffs on imported electronics, cars, and clothes could raise prices for U.S. consumers.
No U.S. commodity prices would drop; domestic industries like services remain least affected.
A trade war could increase U.S. inflation and lower GDP, hitting lower-income families hardest.

Loading paragraph...

A few themes are apparent.

Prices increase the most in sectors that are either are import dependent or rely on complex global value chains. That includes electronics and machinery, vehicles and auto parts, metals and raw materials, and apparel and consumer goods.

For example, the United States doesn’t have the domestic capacity to build large amounts of complex electronic products, like laptop computers and smartphones. Those are made up of parts built and assembled around the world, largely in Asia.

Many automobile manufacturers have set up supply chains that stretch across North America. Many vehicles manufactured in North America will cross borders between Canada, Mexico, and the U.S. multiple times before final assembly. As a result, they would be subject to multiple tariffs throughout manufacturing.

Canada is a major supplier of steel, aluminum, and other raw materials for the United States, as are Mexico and China to a lesser extent.

The United States has very limited domestic apparel and consumer goods industries, meaning those sectors are also exposed to tariffs.

Loading paragraph...

About the Author

Jack Caporal is the Research Director for The Motley Fool and Motley Fool Money. Jack leads efforts to identify and analyze trends shaping investing and personal financial decisions across the United States. His research has appeared in thousands of media outlets including Harvard Business Review, The New York Times, Bloomberg, and CNBC, and has been cited in congressional testimony. He previously covered business and economic trends as a reporter and policy analyst in Washington, D.C. He serves as Chair of the Trade Policy Committee at the World Trade Center in Denver, Colorado. He holds a B.A. degree in International Relations with a concentration in International Economics from Michigan State University.

TMFJackCap

The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.

View Premium Services

Tariffs on Canada, Mexico, and China would have a mixed impact on agricultural commodities and energy. Wheat and oilseeds would likely experience significant price hikes because the U.S. imports a substantial amount of these products from Canada. That would have a downstream impact on the price of food, particularly given that agricultural products tend to have thin margins, leading producers to pass the cost of the tariffs on to consumers.

The price of imported energy is projected to increase. Canada and Mexico supplied approximately 70% of the U.S.'s crude oil imports in 2023. Those countries are key suppliers because they produce different-quality oil that the U.S. refines. Their importance is also due to their geographic proximity to U.S. refiners and existing infrastructure like pipelines and ports.

Services would be highly insulated from tariffs on Mexico, Canada, and China. Cross-border provision of services, like business services or communication services, is generally not subject to tariffs. In some cases, service providers can rely on imported goods, but the pass-through costs to consumers are likely to be less severe.

The overall economic impact of a trade war with Canada, Mexico, and China

The Budget Lab at Yale projects that a 25% tariff on Canada and Mexico and a 20% tariff on China and retaliatory tariffs on U.S. exports would increase inflation and decrease U.S. gross domestic product.

Under a limited retaliation scenario, prices would increase by 1%. A full retaliation scenario, which includes reciprocal tariffs on U.S. products, would see prices increase by 1.2%. That would cost consumers $1,600 to $2,000 before they substitute and limit spending.

A trade war would reduce the disposable income of lower-income households 3 times more than it would that of higher-income households. That’s because lower-income households have to spend more of their cash on consumer staples, many of which are imported. The projected added costs from tariffs hit those households harder, making tariffs a type of regressive tax.

That’s consistent with projections from the Peterson Institute for International Economics, which found that those tariffs would cost the median U.S. household $1,200 a year, even if tax cuts in the Tax Cuts and Jobs Act were extended.

Tariffs and retaliation -- limited or reciprocal -- would shave around 0.6% off of U.S. GDP in 2025 and another 0.1% in 2026 on top of that. Over the next decade, limited retaliation would reduce U.S. GDP by 0.3%, and full retaliation would decrease GDP by 0.4%, according to The Budget Lab at Yale.

Sources

The Budget Lab at Yale (2025). “The Fiscal, Economic, and Distributional Effects of 20% Tariffs on China and 25% Tariffs on Canada and Mexico.”
The Peterson Institute for International Economics (2025). “Trump's tariffs on Canada, Mexico, and China would cost the typical US household over $1,200 a year.”

How Tariffs on Mexico, Canada, and China Could Impact Commodity Prices | The Motley Fool