The Impact of Trump’s Tariffs on Canada, Mexico, and U.S. Consumers

Imagine you’re running a car company with a $5 billion investment in Canada, employing 18,500 workers. Over the years, you’ve reinvested profits into the Canadian market, creating a stable and profitable operation.

One day, a 25% tariff is imposed, raising the price of your $46,200 car to $53,668. This adds $7,468 to the sticker price, which translates to an extra $221.72 per month for the customer in car loan payments.

Faced with this situation, would you pack up, sell your investments, fire 18,500 employees, and move your operations to the U.S.? Not likely. Starting over would cost an estimated $10 billion, doubling your original investment. Instead, you’d probably choose the lesser evil: accepting a yearly loss of 132,000 car sales, resulting in $206 million in lost annual profits.

Over four years—the length of a typical presidential term—you’d lose $824 million in profits. That’s a painful hit, but still far less than the $10 billion price tag of relocating. From a business standpoint, weathering four years of tariffs is a more rational choice than uprooting your entire operation.

For exporters, absorbing reduced profits is a temporary inconvenience. However, the real losers are U.S. consumers. With no viable local alternatives to replace these imports, Americans will be stuck paying higher prices. This decrease in purchasing power will hurt them the most, and it may even shrink some of the exporters’ profits.

Unless the U.S. can produce competitive, cost-effective alternatives domestically, tariffs will backfire, hitting consumers harder than the exporters they target.

Main Points:

1. Relocating production to the U.S. in response to tariffs is prohibitively expensive for exporters.
2. Businesses are more likely to accept temporary profit losses than incur massive relocation costs.
3. Tariffs result in higher prices for U.S. consumers, reducing their purchasing power.
4. Without cheaper domestic alternatives, U.S. consumers bear the brunt of tariff-related costs.

Trump’s tariffs may appear to pressure countries like Canada and Mexico, but they ultimately do more harm to U.S. consumers. Exporters will likely ride out the short-term losses instead of relocating, as the costs of doing so far outweigh the impact of the tariffs. Meanwhile, Americans face higher prices and fewer affordable options. The true path forward lies in fostering domestic innovation and production rather than relying on punitive trade policies.