Businesses and shoppers in the U.S. are bracing for higher prices on everything from gasoline to guacamole, as President Trump renews his threat to impose steep tariffs this weekend on imports from two of the country's biggest trading partners.
Trump told reporters at the White House Thursday that he intends to follow through with his threat to slap a 25% tax on imports from Canada and Mexico starting Saturday, in response to what he called a flow of immigrants and drugs across the country's northern and southern borders.
While the size and scope of the tariffs is still uncertain, many businesses are making contingency plans. Trade data released on Wednesday showed a sharp rise in imports in December, suggesting some companies tried to stockpile goods before any tariffs take effect.
"Importers were trying to bring in goods ahead of time," says Matthew Martdin of Oxford Economics. "Holding inventory isn't without its costs or its risks. But businesses clearly believe there will be enough demand that they won't be sitting on this inventory for long."
Some individual shoppers also tried to beat the tariffs. Personal spending on durable goods such as autos and televisions jumped in December, according to figures released Friday by the Commerce Department. Mexico is a leading producer of flat-screen TVs.
Tariffs have come up more than 200 times on corporate earnings calls this month.
General Motors told financial analysts on Tuesday that it could shift some pickup truck production out of Mexico and Canada if tariffs are imposed. But the automaker is reluctant to act while the trade landscape is still uncertain.
"We are prepared to mitigate near-term impacts," said CEO Mary Barra. "What we won't do is spend [a] large amount of capital without clarity."
The auto industry in North America is highly integrated, relying on manufacturing in all three countries.
Canada is also a major supplier of crude oil to U.S. refineries, especially in the Midwest.
"Increasing expenses by 25% is going to lead to higher costs at the pump for U.S. consumers and higher input costs for businesses around the country," Martin said.
Trump hinted on Thursday that oil imports might be exempted from the tariffs. Martin suspects there might be other adjustments as well.
"We don't think equity markets would really like 25% tariffs on Canada and Mexico," Martin said. "It would really hurt the economy and hopefully that dissuades him from going full bore. This might just be more of a negotiating tactic."
Trump threatened tariffs on imports from Colombia last weekend, but changed course after that country reached an agreement with the U.S. on terms for accepting deportees. The stakes of a trade war with Mexico and Canada are much higher. U.S. trade with each of its next-door neighbors is more than 20 times that with Colombia.
Mexico and Canada would likely respond to any tariffs by imposing taxes of their own on U.S. exports.
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