Editor’s note: This story has been updated to include Trump’s remarks late Tuesday about hitting Chinese goods with tariffs.
In the hours immediately after his swearing-in, President Donald Trump said Monday he will enact steep tariffs on Mexico and Canada starting next month and moved through executive orders to reassess trade with other foreign nations.
Trump told reporters tariffs of 25% would be enacted against Mexico and Canada starting Feb. 1, saying the countries allow undocumented immigrants and fentanyl to cross into the United States.
In the run up to his inauguration Monday, he has floated across-the-board tariffs on imports from all countries and steeper import taxes against neighbors Canada and Mexico. He has also singled out China, and on Tuesday said he would impose a 10% tariff on Chinese goods starting next month, citing the flow of fentanyl, multiple media outlets reported.
Credit: J. Scott Trubey/AJC
Credit: J. Scott Trubey/AJC
The Wall Street Journal reported Tuesday afternoon that Trump was using the threat of tariffs on goods from Canada and Mexico to pressure the two nations to renegotiate a continental trade deal. However, WSJ also reported that some lawmakers close to Trump warned not to take the threats lightly, and Canada’s prime minister Justin Trudeau said Canada is weighing retaliatory moves.
Tariffs are taxes on imported goods. Those taxes are typically passed along by businesses to the buyers of products, whether the buyers are manufacturers obtaining parts that go into other things, such as an automobile, or a consumer shopping at a store or online.
Economists generally view tariffs as inflationary, and the cost of living and inflation were the top issues among Georgia voters polled this month by The Atlanta Journal-Constitution.
The AJC poll found 49% of respondents are somewhat or strongly opposed to Trump’s proposed tariffs, compared to 42% who strongly or somewhat support Trump’s plans. About two-thirds of respondents said they thought Trump’s promised tariffs would increase prices.
Nicole Gillyard, a certified public accountant and CEO of her College Park firm, said many of her clients are hoping Trump’s tariff threats are all talk.
Large corporations can find more ways to shift, absorb or pass along the costs of tariffs to their customers, she said. But smaller companies often don’t have as many levers to pull or the capital cushion to absorb those costs.
“So, it’s the small businesses that will have to make those changes, either increasing the prices or just incurring that cost, eating away at their profit margin, cutting staff,” she said.
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.
Top imports into Georgia from overseas including vehicles, immunological products, telephone sets and other communications equipment, auto parts and heavy-duty construction equipment.
China is the top import source for Georgia, amounting to about $17.5 billion in goods in 2023, according to the state’s Department of Economic Development. South Korea comes next at $14.8 billion in goods, and Mexico was the third-largest exporter to Georgia with $13.7 billion in goods. Imports from Canada, another top-10 trade partner, were valued at about $6.5 billion.
These countries are also top buyers of Georgia-made products. Canada is No. 1 at $7.6 billion in purchases of Peach State goods in 2023, followed by No. 2 Mexico ($4.8 billion) and No. 3 China ($3.9 billion), according to the state Department of Economic Development.
Georgia’s top exported goods include civilian aircraft, automobiles, aerospace components, poultry products and wood pulp and paper products. If these countries retaliate with tariffs of their own, that could hurt Georgia producers.
Trump has claimed revenue created by tariffs could help fight the deficit and pay for other priorities. Experts say the tariff threat also could be a negotiating ploy for certain policy aims.
“I think the biggest damage from tariffs is the follow-on effects that other countries retaliate, that takes away market share from certain U.S. firms,” Associated General Contractors of America Chief Economist Ken Simonson said in a recent media briefing. “It drives up prices for other items. … So, I am quite worried about both specific effects on construction costs and, quite frankly, disrupting supply chains, adding to those availability problems that are still showing up on some materials, but more broadly, the damage to the overall economy.”
Trump said during his inaugural address that his administration would establish an External Revenue Service to collect tariffs, saying “It will be massive amounts of money pouring into our Treasury, coming from foreign sources.”
The Department of Commerce and U.S. Trade Representative generally implement tariffs for the administration. U.S. Customs and Border Protection currently collects the duties.
Kimberly Clausing, an economist and nonresident senior fellow at the Peterson Institute for International Economics — a nonpartisan organization that analyzes the global economy and makes policy recommendations — said those hoping the tariffs are merely a bargaining chip have to hope Trump is talking out of both sides of his mouth.
“You can’t collect revenue on tariffs that are just a threat,” she said. “If your threat succeeds and you never levy the tariffs, there’s no revenue. They can’t have it both ways.”
In a memo to cabinet members released Monday, Trump directed the Commerce Secretary to investigate trade deficits and to “recommend appropriate measures, such as a global supplemental tariff or other policies, to remedy such deficits.”
The memo also directed the U.S. Trade Representative to review the U.S.-China trade agreement to determine whether China is complying and to recommend actions “up to and including the imposition of tariffs or other measures as needed.”
Tariffs almost always raises prices for everyone. While the duties increase prices on imported goods, they can end up raising prices on domestically produced goods as well.
U.S. factories may not be able to expand quickly enough if the import taxes price out foreign goods, meaning tariffs may cause shortages, experts say. U.S. manufacturers that rely on foreign-made parts to make their goods will also see their costs rise and will likely pass those costs along to buyers.
Clausing said even the mention of tariffs likely raise prices on goods, since domestic companies will try to expedite orders to beat the implementation deadline.
“I would expect those price pressures to happen almost immediately and for households to feel that burden directly,” she said.
Tariffs also do not happen in a vacuum, with foreign nations likely to retaliate.
Lloyd Avram, president of the Georgia Association of Manufacturers, urged the Trump administration to proceed with caution as it assesses trade relationships.
“Trade uncertainty is a significant concern for Georgia manufacturers,” Avram said. “Georgia manufacturers operate in a competitive global marketplace, shipping products around the world and importing needed goods through Georgia’s first-rate ports system. We encourage the Administration to approach trade policy decisions with care and precision.”
Mio Maeda, Japanese Consul General in Atlanta, said last week that it was hard to say what concrete policies Trump will implement, but changes to U.S. economic policy are expected.
“A lot of Japanese companies are trying to figure out what kind of impact it would have,” Maeda said.
Japanese firms have long been relocating production to other countries, first to China in the 1990s, then to Southeast Asia “and now the United States,” he said. If the economy improves, that will make it more attractive to do business here, he noted.
“Many companies have already established production facilities and factories in this region, in particular in the Southeast,” Maeda said. He said he expects further adjustments based on policies under the new administration.
