WASHINGTON (NEXSTAR) — One of President-elect Donald Trump’s key campaign pledges is to implement significant tariffs on the United States’ largest trade partners.
At a rally in November, Trump declared, “I’m going to immediately impose a 25% tariff on everything they send into the United States of America.”
The tariffs are aimed at combating illegal immigration and drug trafficking.
Rodney Lake, Director of the George Washington University Investment Institute, explained, “25% on Mexico, 25% on Canada, and an additional 10% on China.”
But what is driving President-elect Trump’s push for these tariffs, and how do they function?
Lake clarified, “If you’re producing cars in Mexico and you want to encourage people to buy U.S.-made cars, how can the government raise prices? One way is by imposing a tariff on those imports.”
The primary goal, according to Lake, is to strengthen U.S. domestic industries. However, he cautions that consumers will feel the impact of these tariffs quickly.
“You’ll see higher prices almost immediately because it’s unlikely that these companies will absorb the full cost. They’ll likely pass those increased costs on to consumers,” Lake said.
The tariffs will raise the price of raw materials such as steel, plastic, and crude oil from Canada, cars and car parts from Mexico, and electronics like smartphones and computers from China. Lake notes that the U.S. will need time to build up its domestic production capacity.
“It could take years before we see a real impact on domestic production of these items,” Lake stated.
However, Lake suggests that President-elect Trump may be using these tariffs as a bargaining tool, aiming to bring these countries to the negotiation table in an effort to reach mutually beneficial agreements.
