Tariffs on Canada and Mexico recently took effect, and they “promise” to raise prices for consumers in ways we don’t even expect, according to the economists. Tariffs are a tax on foreign imports, paid by the United States on particular goods.

President Trump imposed a 25% tariff on Canada and Mexico, the two largest trading partners of the United States. Trump also set a lower 10% tariff on Canadian energy. Businesses generally pass along some of the additional cost of tariffs to consumers, as economists state. Some products, such as fruits and vegetables from Mexico and oil from Canada, are bound to get more expensive as a result.

However, there are also far-reaching impacts on various supply chains that aren’t just as clear-cut. It is well known that such tariffs provoke a certain ripple effect that moves through complex supply chains in ways we don’t know just yet.

These dynamics could make it quite challenging to predict the exact impacts we might have to deal with on products and prices. For instance, let’s take a fast-food chicken sandwich. Even if none of its ingredients might come directly from Canada or Mexico, the aluminum foil used in its packaging could drive up costs that could then be passed on to consumers.

Almost everything consumers buy these days is transported by trucks that are fueled by refined oil products. This means that the impact of tariffs on Canadian crude oil “is much broader than it seems at first,” as Travis Tokar, professor of supply chain management at Texas Christian University, explained.

The U.S. sources half of its foreign fuel from Canada, according to the Peterson Institute for International Economics. “Costs eventually go through the supply chain to the end consumer” as Mary Lovely, a senior fellow at the Peterson Institute for International Economics, added.

How expensive will these tariffs be for the average person?

The U.S. traded no less than $1.6 trillion of goods with Canada and Mexico back in 2024, which accounted for over 30% of total U.S. trade. Tariffs on both Canada and Mexico are soon expected to cost the average American household no less than $930 in 2026, according to the most recent analysis conducted by the Urban-Brookings Tax Policy Center.

The levies would end up being $1,200 a year for the typical household, after accounting for tariffs on China. The analysis only takes into consideration a 10% tariff on Chinese imports, that Trump imposed in February. Ever since he added another 10%.

So far, the PIIE assessment of consumer impact seems to be quite “conservative,” since it doesn’t factor in how domestic manufacturers would respond to less foreign competition. “Such tariffs will likely increase the price of imported goods,” and domestic producers would probably raise their prices to “match” those of their foreign counterparts.

This is bound to be “incredibly disruptive” for the auto sector

Consumer impact might also depend on the particular industry and company. Economists believe that the most affected sector will be the automobile industry, especially since automakers have extensive supply chains built all over North America.

For example, a new car assembled in Alabama could seem unaffected by the tariffs since most parts of that car come from Mexico or Canada. Major automakers like Ford, General Motors or even Stellantis could face “higher production costs caused by the reliance on cross-border supply chains for parts and vehicles,” according to a Bank of America Global Research note.

Hence, Canada and Mexico tariffs might add no less than $6,000 to the cost of a car, according to an estimate from investment bank Benchmark Co. in February. This kind of dynamic is expected to drive up car insurance premiums. “This can turn out to be incredibly disruptive for the auto industry,” as Douglas Irwin, an economics professor at Dartmouth College and author of “Clashing over Commerce: A History of U.S. Trade Policy,” explained.

Fresh produce could also see swift price hikes

Brian Cornell, the CEO of Target, believes that the Mexico tariffs will force the company to raise prices on fruits and vegetables, such as strawberries, avocados, and bananas. He also added that this might happen only within a few days.

Food prices overall could rise to 2% in the short term, according to one of the most recent analyses of Canada, Mexico, and China tariffs, conducted by the Budget Lab at Yale. Fresh produce prices could also increase by almost 3%.

Construction materials are quite a big deal as far as exports from Canada go since they also account for over 40% of U.S. imports of wood products. If you decide on a renovation this summer, you might be out of luck.

Big companies might be in a position to absorb some of the tariff cost, instead of simply passing on everything to consumers. However, agricultural producers, for instance, might not be in a position to do that, especially since there are often low margins across the supply chain.

Naturally, businesses could absorb some of those costs, in their attempt to avoid instant sticker shock for consumers. However, they should expect less profit to invest in new equipment, hire workers or even develop brand new products, which could create an “economic drag that’s less visible but still quite significant,” as Tokar added.

Retaliation comes with its own effect

Consumers might also be affected by foreign retaliation on U.S. trade, something to which the majority of officials in Mexico, Canada, and China, have already committed. “You can’t put these kinds of tariffs in place without expecting any retaliation, and that’s what’s happening right now,” as Field explained.

Well, first off, Canadian Prime Minister Justin Trudeau announced a 25% levy on CA $30 billion worth of U.S. imports, right away, in fact. Tariffs on yet another CA$ 125 billion in U.S. goods will take effect in the upcoming 21 days.

Trump responded to such measures Tuesday by vowing to impose more tariffs on Canada. Ontario also plans to impose a 25% tax on the electricity it exports to 1.5 million homes in Minnesota, Michigan, and New York, in retaliation for Trump’s tariffs.

China also plans to introduce retaliatory tariffs of up to 15% targeted at U.S. agriculture. U.S. corn might face a 15% levy, as soybeans will be hit with a 10% duty, for instance. Mexican President Claudia Sheinbaum stated that she plans to announce retaliatory measures soon enough.

Most recent tariff news

US President Donald Trump significantly increased the goods exempt from his new tariffs on Canada and Mexico that were recently imposed. In fact, it is the second time in only two days that Trump decided to roll back his taxes on imports from the United States’ two biggest trade partners, measures that have raised plenty of uncertainty for businesses and worried financial markets, too.

In response, Mexican President Claudia Sheinbaum congratulated Trump for the move, as Canada’s finance minister declared the country would also hold off on its threatened second round of retaliatory tariffs on US products.

Canadian Prime Minister Justin Trudeau also stated that he had quite a “colorful” conversation about tariffs in a recent phone call with Trump. The US President used profane language at least once during their heated exchange, according to US and Canadian media reports.

If you found this article useful, we also recommend checking: Trump’s Tariffs Hit Close To Home: Reevaluate These 10 Household Expenses