The Blubber

President Donald Trump was set to impose a 25% tax on imports from Canada and Mexico starting Tuesday, along with increasing his tariffs on Chinese products to 20%. All three countries, which are America's top trading partners, are warning of potential retaliation.

In 2023, the United States traded nearly $2.2 trillion in goods—both exports and imports—with the countries the president is targeting: $840 billion with Mexico, $762 billion with Canada, and $582 billion with China.

Trump has declared an economic emergency to justify the tariffs, marking the most aggressive use of such measures by the U.S. since the 1930s. He asserts that these sanctions are aimed at curbing the flow of undocumented migrants and illicit drugs across the U.S. border.

Energy imports from Canada, including oil, natural gas, and electricity, will be taxed at a reduced rate of 10%—a concession to households in the Northeast and Midwest U.S., which depend on Canadian energy.

Here are some key imported goods that may face higher costs:

For decades, auto companies have built supply chains spanning the borders of the U.S., Mexico, and Canada. Over 20% of the cars and light trucks sold in the U.S. are made in Canada or Mexico, according to S&P Global Mobility. In 2023, the U.S. imported $79 billion worth of cars and light trucks from Mexico—more than any other country—and $31 billion from Canada. The U.S. also imported $81 billion in auto parts from Mexico and $19 billion from Canada. For example, Ford F-series pickups and the iconic Mustang have engines made in Canada.

“You’ve got engines and car seats and other parts that cross the border multiple times before being assembled into a finished vehicle,” said Scott Lincicome, a trade analyst at the Cato Institute. “American parts go to Mexico, are incorporated into cars, and are then shipped back to the U.S.”

“Add 25% tariffs into that mix, and it’s like throwing a grenade into the system,” he added.

China is another major source of auto parts for the U.S., supplying $18 billion worth in 2023.

S&P Global Mobility estimates that importers will likely pass most—if not all—of these price increases on to consumers. TD Economics suggests that the price of an average U.S. car could rise by about $3,000—at a time when the average new car already costs nearly $49,000, and the average used car is priced at around $25,000, according to Kelley Blue Book.

Canada remains the U.S.’s largest foreign supplier of crude oil, with $98 billion worth of crude shipped to the U.S. in 2024—far ahead of Mexico, which sent only $12 billion. For many U.S. refineries, Canadian crude is essential. It’s the type of crude that American refineries are designed to process—heavier crude, compared to the lighter crude produced through fracking in the U.S., which many refineries, especially in the Midwest, cannot process efficiently.

Regarding the tariffs on Canadian oil imports, Lincicome commented, “How the heck does this shake out? My guess is that it results in higher gas prices, especially in the Midwest.”

Tariffs on Chinese imports could affect a wide range of consumer goods that Americans rely on. Cell phones, computers, and other electronics were among the top imports from China in 2023, according to the Commerce Department. The U.S. also imported over $32 billion worth of toys, games, and sporting goods from China last year.