President-elect Donald Trump said this week he would enact steep new tariffs on three key U.S. trade partners unless certain demands were met by each as part of Trump’s expected crackdowns on drugs and border crossings by undocumented immigrants.
Tariffs, a tax on imported goods, are typically costs that are passed along by businesses to buyers of products. Canada, China and Mexico, the three countries targeted, rank among Georgia’s biggest trade partners. The U.S. is the largest importer of goods in the world, and such tariffs, if implemented, would likely raise prices on things like automobiles and food produced in Mexico and Canada; clothes, toys and electronics made in China; and other goods.
What would such substantial tariffs mean for Peach State businesses and consumers? Here’s what you need to know.
What did Trump call for this week?
Trump said in an online post that when he takes office, he intends to immediately impose tariffs of 25% on goods coming from Mexico and Canada. He said he would impose tariffs of 10% on goods from China.
Can he do that without congressional approval?
Yes. For the most part, tariffs can be imposed by a president with executive orders.
There would almost certainly be challenges, since new tariffs might violate the trade pact made with Mexico and Canada during Trump’s first term.
Credit: AP
Credit: AP
What exactly is a tariff?
A tariff is a tax on goods crossing a border. It is paid by whatever company or person is bringing in the goods. Since it adds to the importers’ price, they typically tack it onto the price tag for the company or consumer.
Georgia trade with Trump’s targets
China is the top import source for Georgia, amounting to about $17.5 billion in goods last year, according to the state’s Department of Economic Development. Mexico was the third-largest importer with $13.7 billion in goods. Canada is farther down the list, but still shipped about $6.5 billion into the state.
Credit: Stephen B. Morton for the AJC
Credit: Stephen B. Morton for the AJC
What are the potential upsides of a tariff?
It makes imports more expensive. So, it can prevent some importers from undercutting U.S.-made products. With enough time, tariffs can provide an incentive for U.S. manufacturers to expand their production and for foreign manufacturers to build plants in the United States. Tariffs during Trump’s first term against all foreign makers of washing machines eventually created U.S. jobs, although consumers paid more for the machines.
What are the potential downsides of tariffs?
They nearly always raise prices for U.S. companies and consumers.
And because U.S. factories may not be able to expand quickly enough if the import taxes price out foreign goods, tariffs may cause shortages, experts say. Moreover, they often hurt other U.S. manufacturers, since many factories have to import parts used in production.
“The United States does not make things in their totality — no nation does,” said Susan Ariel Aaronson, professor of international affairs and director of the Digital Trade and Data Governance Hub at George Washington University. “This will create more inflation and jeopardize jobs.”
Tariffs on steel during Trump’s first term did mean more jobs at U.S. steelmakers, economists say. However, even more jobs were lost among many companies that used steel in production whose costs went up.
Tariffs are blunt instruments and the law includes no official tracking of any tariff’s effectiveness, Aaronson said. “This is a 19th century tool.”
What’s the likely effect of the tariffs?
Some companies that buy from those three countries are expected to try to stock up on imports before Trump’s inauguration in January. That will soften the blow for them and their customers in the near term.
Longer range predictions vary widely, partly because some experts think Trump is bluffing, using tariffs as bargaining chips and not set policy. But even if his follow-through were certain, the response of other countries is not — and if there are U.S. tariffs, some countries are bound to retaliate.
During Trump’s first term, tariff retaliation hurt U.S. farmers and forced the government to pay tens of billions of dollars to soften the blow.
This time, economists at JPMorgan Chase say tariffs will slow overall economic growth and raise unemployment, but neither effect will be large.
Much more pessimistic are researchers at the Peterson Institute for International Economics, which sees a possible global trade war that would stymie growth and reignite inflation.
Why is Trump vowing to raise tariffs?
This is not a surprise move. In his first term, Trump imposed tariffs and all through the campaign, he promised higher tariffs that would spark more manufacturing growth, create many jobs and bring in billions of dollars to the U.S. Treasury. However, on Monday his vow to raise tariffs was pegged to what he said was an “invasion” of immigrants from Central America through Mexico and the flow of fentanyl.
That rationale drew some skepticism. Critics say tariffs will have no impact on the drug trade.
“This is all about symbolism,” Aaronson said.
Georgia’s Top Import Markets in 2023
The value of goods that entered Georgia from other countries last year.
1. China: $17.5 billion
2. South Korea: $14.8 billion
3. Mexico: $13.7 billion
4. Germany: $10.3 billion
5. Japan: $7.1 billion
6. Canada: $6.5 billion
The top import products to Georgia in 2023:
1. Motor vehicles: $13 billion
2. Immunological products: $6.9 billion
3. Telephone set and electrical apparatus: $3.6 billion
4. Motor vehicles parts & accessories: $3.6 billion
5. Construction-related heavy machinery such as bulldozers, graders, excavators, etc.: $3.4 billion
Source: Georgia Department of Economic Development
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