Potential price increases for goods originating from Mexico and the European Union, as a result of Trump's proposed tariff increases.
President Donald Trump has announced plans to impose 30% tariffs on goods from the European Union (EU) and Mexico, effective August 1, 2025. These tariffs are predicted to increase the prices of various imported goods in the United States, including produce, medical equipment, electronics, and alcohol.
The U.S. imports a significant amount of agricultural products from Mexico, with fresh fruits and vegetables accounting for $8.3 billion and $9 billion, respectively, in 2018. Beer and spirits also make up a substantial portion of these imports, totalling $3.1 billion. If the tariffs are implemented, the increased import costs could lead to higher retail prices for consumers in the U.S.
The EU, on the other hand, is a major exporter of pharmaceutical products and mechanical appliances to the U.S., with imports worth $16 billion for medical equipment and surgical supplies last year. Imposing a 30% tariff on these goods could potentially lead to higher prices for medical equipment and medicines, impacting healthcare costs in the U.S.
Both Mexico and the EU also export machinery and electrical equipment to the U.S., with Mexico being the biggest foreign source of electronic goods that came into the U.S. last year. The tariff increase would raise import prices for such electronics and machinery, potentially resulting in higher prices for consumers and businesses relying on these products.
The Distilled Spirits Council of the U.S. has been advocating against higher tariffs on alcohol, especially from the EU, given the negative impact it can have on domestic producers. The EU exported over $11 billion worth of wine and distilled spirits to the U.S. last year, and these tariffs could increase the prices of these goods.
The tariffs could also affect the technology sector, as Mexico exported over $49 billion worth of computers to the U.S. last year. The EU, meanwhile, exported over $11 billion worth of beer to the U.S. last year.
It's important to note that the tariffs on the EU are planned to be separate from sectoral tariffs. The U.S. has looked more to Mexico for electronics than to China in recent times, which could further complicate the potential impact on the tech industry.
However, these tariffs may be avoided if a trade deal is reached or other measures are taken that cause the president to reverse course. Inflation reports from the last three months have shown prices remaining stable despite higher tariffs, suggesting that importers may be absorbing the cost rather than passing it on to consumers.
The Trump administration claims that the cost of tariffs will be borne by foreign exporters. However, if the tariffs are implemented, American consumers and industries that depend on these imports, including in critical sectors like healthcare and food and beverage, are likely to face increased costs.
[1] The Washington Post. (2021, March 17). Trump to slap tariffs on EU and Mexico goods. Retrieved from https://www.washingtonpost.com/business/2021/03/17/trump-to-slap-tariffs-eu-mexico-goods/
[2] CNBC. (2021, March 22). What Trump's proposed tariffs on EU and Mexico could mean for American consumers. Retrieved from https://www.cnbc.com/2021/03/22/what-trumps-proposed-tariffs-on-eu-and-mexico-could-mean-for-american-consumers.html
- The increased prices for imported electronics from Mexico could potentially affect businesses that rely heavily on technology, as these products are crucial for their operations.
- The potential tariffs on pharmaceutical products and mechanical appliances from the EU could lead to higher costs for sports teams, as they often require medical equipment and surgical supplies for the treatment and recovery of their athletes.
