Prices of lots of things may go up, but the question is, by how much?
of ConsumerAffairsAs expected, President Trump has slapped 25% tariffs on Mexican and Canadian imports and a 10% levy on Chinese goods. Mexico and Canada retaliated with tariffs on U.S. exports.
So, where does that leave consumers? As we previously reported, Procter & Gamble doesnt expect to pass on the full amount of the tariff to consumers in the form of higher prices on the products it imports, but its likely it will have to raise some prices.
For example, the U.S. imports a lot of food products from Mexico, especially fresh produce. A 25% tariff will likely mean that already high grocery prices will get even more expensive. Cars and trucks manufactured in Canada and Mexico by U.S. auto companies will also be more expensive.
Even auto factories in the U.S. will likely face higher costs because some of the parts and materials they use are imported from one of the three countries.
Many consumer goods that will bear the tariffs are more discretionary, such as electronics, apparel and household items. If those become more expensive, consumers may be able to find domestic alternatives.
Its possible the tariffs could disrupt supply chains, leading to shortages of some goods. Shortages usually result in higher prices. Even U.S.-based manufacturers that use imported materials will face higher costs and are likely to pass some of those costs on to consumers in the form of higher prices.
Prices may rise, but by how much?
Its hard to say how much of the tariffs that businesses will add to their prices. When Procter & Gamble reported fourth-quarter earnings last month, the companys chief financial officer told reporters that raising prices would be a last resort. It would first try to reduce costs and that raising prices would be a last resort, and if prices did go up they would rise incrementally.
However, at a time when inflation remains sticky, economists are nervous. The Congressional Budget Office has estimated the tariffs might cost the average household an extra $400 per year.
The Personal Consumption Expenditures Price Index, the Federal Reserves most important inflation gauge, rose 2.6% in December over the previous 12 months, signaling that the Feds inflation battle is not over.
The other shoe drops
The thing about tariffs is that they work both ways. Canada and Mexico are losing notimeslapping retaliatory tariffs on U.S. goods, while China readies its response.
The Canadian government is placingits own retaliatory 25 percent tariffs on more than $100 billion worth of U.S. goods. And Mexican President Claudia Sheinbaum of Mexico said she would unveil her countrys response this week. China said it would take corresponding countermeasures.
Canada said it would targeet everything from U.S.-made honey, tomatoes and whiskey to refrigerators and toilets.
Ms. Sheinbaum hasn't yet specified which North American products she will target but there's speculation she will use a "carousel" approach, slapping tariffs on an ever-rotating list of American products. The theory behind this is that it would destabilize different swaths of the U.S. economy at different times, energizing more industries to call down their lobbying power on Congress.
Photo Credit: Consumer Affairs News Department Images
Posted: 2025-02-03 04:57:40
