On a brisk March day in 2025, the Port Newark Container Terminal in New Jersey bustled with activity, unaware of the economic shifts taking place. Tariffs targeting Canada and Mexico were rolled out on Tuesday, bringing with them a wave of price hikes that could surprise consumers, economists warned.
The essence of tariffs is straightforward: they are essentially taxes levied on goods imported from foreign countries, essentially an additional cost footed by U.S. importers. This Tuesday, President Trump implemented a significant 25% tariff on goods from Canada and Mexico, America’s top trading partners, while Canadian energy products faced a lesser 10% charge.
The consensus among economists is clear—U.S. businesses will likely transfer some of these new costs to consumers. Everyday goods such as Mexican fruits and vegetables or Canadian oil, key exports to the U.S., are expected to see price increases. However, the effects will ripple through the more obscure corners of supply chains too, complicating the economic landscape.
Travis Tokar, a supply chain management expert from Texas Christian University, highlighted this complexity in a recent email, noting that tariffs create unforeseen ripples throughout intricate supply networks. He pointed out that, for example, while a fast-food chicken sandwich’s ingredients might not be directly sourced from Canada or Mexico, the aluminum foil it’s wrapped in might be—leading to potential cost increases.
Furthermore, Tokar emphasized that the movement of virtually all consumer goods across the country relies on truck transportation, heavily dependent on refined oil, much of which comes this side of the border from Canada. This scenario alone indicates that the impact of tariffs on Canadian crude could extend far wider than it initially appears.
According to the Peterson Institute for International Economics, nearly half of America’s foreign fuel is sourced from Canada. Mary Lovely, a senior fellow at the institute, noted that eventually, these increased costs percolate down to the consumer level.
To put things in perspective, last year the United States exchanged $1.6 trillion worth of goods with Canada and Mexico, making up over 30% of its total trade, according to the Census Bureau. The tariffs are expected to burden the average American family with an extra $930 in expenses by 2026, as estimated by the Urban-Brookings Tax Policy Center. If you factor in the impact of tariffs on China, the cost balloons further to $1,200 annually per household, according to the Peterson Institute’s evaluation. Lovely acknowledges this evaluation might even underestimate the true economic weight.
One potential upside of these tariffs—at least for domestic manufacturers—could be a reduction in foreign competition, giving them room to raise prices. Alexander Field, an economist at Santa Clara University, observed that domestic producers might align their prices with those of imports, escalating the overall cost to consumers.
The automobile industry, with its deep North American supply chain roots, stands out as a particularly vulnerable sector. As Travis Tokar explained, even an Alabama-assembled car could indirectly face cost increases because many of its parts originate from Canada or Mexico. A Bank of America report suggests that major car manufacturers, like Ford and General Motors, will likely endure steeper production costs due to their cross-border supply chains. Benchmark Co. forecasts that tariffs on Canada and Mexico could inflate vehicle costs by almost $6,000, subsequently driving up insurance premiums as well. Dartmouth’s Douglas Irwin concurs, labeling the situation as exceedingly disruptive for the auto sector.
Turning to agriculture, fresh produce prices could rapidly escalate due to these tariffs, as noted by Target’s CEO, Brian Cornell. Within days, consumers might start to feel the pinch on products like strawberries and avocados, and a Yale analysis anticipates food prices overall could spike nearly 2%, with fresh produce jumping almost 3%.
Building materials, especially those from Canada, are also at risk. Canada supplies over 40% of U.S. wood imports, according to PIIE. For anyone planning home renovations, this summer could pose a pricing challenge, notes Lovely.
While large corporations might absorb some tariff costs, thereby cushioning consumers from the initial blow, their reduced profitability might stymie investments in innovation or workforce expansion. Tokar warns that while this drag is less visible, its economic impact remains significant.
Of course, the story doesn’t end there. Retaliatory measures from foreign nations also stand to affect U.S. consumers. Both Mexico and Canada, as well as China, are promising counter-tariffs. Canadian Prime Minister Justin Trudeau, for instance, declared a 25% levy on certain U.S. imports, with additional measures slated to take effect shortly. In response, President Trump is considering further tariffs. Meanwhile, Doug Ford, leader of Ontario, has declared a 25% tax on its electricity exports to several U.S. states as a direct answer to Trump’s tariffs. Elsewhere, China plans to introduce significant duties on U.S. agricultural products, targeting key goods like corn and soybeans. Mexican President Claudia Sheinbaum is preparing to announce her country’s retaliatory actions soon.
The unfolding tariff saga epitomizes the intricate dynamics of global trade and its profound implications on the everyday lives of consumers and businesses alike.
