President Trump will implement 25% tariffs on goods from Canada and Mexico and 10% on China effective tomorrow, Feb. 1, holding true to his earlier statements, according to White House Press Secretary Karoline Leavitt .
The tariffs are widely opposed by officials from those governments and many private companies. Leavitt said the tariffs are intended to stop the illegal import of fentanyl into the US that has killed thousands of Americans over the last two years.
In comments later Friday, President Trump said the tariffs ultimately will apply to chips and related electronics, steel and aluminum, pharmaceuticals and ultimately copper.
Experts have said the tariffs will raise prices on goods coming to the US and cause supply chain disruptions. Autos sold in the US could see price increases of up to $3,000 per car, while an average laptop could increase by $357 and an average smartphone will jump by $213.
Canada provides by far the largest amount of oil supplied to the US, which has recently reached 4 million barrels of oil per day, four times what OPEC provides. Mexico supplies about 400,000 barrels a day. Oil is used in energy generation used to make products, and any increase would increase the price of end products.
Prices will go even higher if Canada, Mexico and China retaliate, as some experts predict will happen, kicking off a trade war. Canadian Prime Minister Trudeau recently promised to respond in kind with "robust, rapid" retaliatory measures.
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Because the electronics industry has a large and dispersed supply chain, the impact of tariffs from the three countries could be especially onerous. Some cars have 5,000 electronics components and those could be sourced from hundreds of suppliers located in dozens of countries. Each time an electronic component arrives in US from China it will likely be subject to the 10% tariff and if the component is incorporated in a PCB or other larger component and sent to Mexico or Canada for assembly or packaging, it would be subject to the 25% tariff on goods from those countries once it is returned for final sale to the US.
President Trump has raised the issue of stopping illegal fentanyl entering the US before, and has also said the tariffs are intended to persuade companies to locate their operations in the US where the corporate tax could go as low at 16%, down from the current 21%.
Some economists have predicted the price increases on goods subject to tariffs will contribute to a higher overall interest rate. If the tariffs are met by tariffs from the other side, there could be a major impact on the overall economy. "It's not a small issue," said Jack Gold, an analyst at J. Gold Associates.
The effect might not be immediate but could have a meaningful effedt on business profits, he added. "Trade wars never help businesses, and the fallout effect are usually not foreseen," he said.