US President Donald Trump has imposed new tariffs on Canada and Mexico, escalating tensions and risking a trade war between the US and its neighbors.
Imports from Canada and Mexico will now face a 25% tariff, prompting retaliatory measures from both nations. Given their deeply integrated economies, with $2 billion worth of goods crossing borders daily, these tariffs could significantly impact American consumers.
While Trump claims the move will protect American industry, economists warn it could increase prices for consumers. Since the import tax is paid by US companies, they may either pass the cost on to customers or reduce imports, leading to limited product availability.
Which Goods Will Get More Expensive?
Cars
Modern cars sold in the US are rarely made in one place—parts often cross the Mexican and Canadian borders multiple times before final assembly.
Automakers built plants across North America under free trade agreements, but the new tariffs could increase production costs by $3,500 to $12,000 per vehicle, according to the Anderson Economic Group.
Liquor
Mexican beer brands like Modelo and Corona, which dominate the US market, could become more expensive if importers pass on higher import taxes to consumers.
For spirits, the impact is more complex. Since the 1990s, liquor has been largely free of tariffs, and industry groups from the US, Canada, and Mexico have expressed concern over the new trade barriers.
Certain alcohols, such as Bourbon, Tennessee whiskey, Tequila, and Canadian whisky, are legally protected as regional products, meaning they can only be produced in their respective countries.
Houses
The US imports about a third of its softwood lumber from Canada annually, a key material in home construction.
While Trump insists the US has enough lumber, the National Association of Home Builders has warned that these tariffs could increase the cost of building homes, making housing less affordable.
On March 1, Trump ordered an investigation into additional lumber tariffs or domestic production incentives, with findings expected later this year.
Fuel Prices
Canada is America’s largest supplier of crude oil, accounting for 61% of US oil imports in recent trade figures.
While Canadian goods face a 25% tariff, oil imports are subject to a lower 10% tax. However, US refineries rely heavily on thicker, heavier crude oil from Canada and Mexico to maximize production of gasoline, diesel, and jet fuel.
If Canada retaliates by cutting oil exports, fuel prices could rise at the pump, further impacting American consumers.
