President Donald Trump’s recent threats to impose tariffs on imports from Mexico and Canada have raised significant concerns among economists and consumers alike. A proposed 25% tariff on nearly all goods from these neighboring countries could drive up prices for gas, groceries, and housing throughout the United States, particularly hitting Arizona hard, where tourism and trade are heavily reliant on these two countries.
On February 1, Trump announced the tariffs—placing immediate economic pressure on both countries and using it as leverage to fortify his immigration policy and border security initiatives. After the announcement, he temporarily put the tariffs on hold until March 4, aiming to gain concessions related to these issues. The looming tariffs, according to experts, could act as a self-imposed tax, stressing consumer budgets at every level.
Daniel Scheitrum, assistant professor at California Polytechnic State University, noted, “It’s just going to be a self-imposed tax that's going to increase prices and increase the cost of living in the United States.” The Peterson Institute for International Economics estimates the tariffs could cost the average American family $1,200 annually.
Arizona, which exports about $8 billion worth of goods to Mexico alone, relies heavily on agricultural products such as copper, electronics, and aircraft components. The state’s fresh produce industry is particularly vulnerable; approximately 60% of the U.S. fresh fruit supply and 38% of fresh vegetables are imported, with Mexico being responsible for over 50% of those. The Fresh Produce Association of the Americas’ Allison Moore warned, “If you want a strawberry in February, you are going to have to grow it somewhere warmer.” She elaborated on how prices would inevitably rise if tariffs are enacted, translating to higher grocery bills for consumers.
Imported beverages, including popular brands like Modelo and Corona—both of which are produced by Constellation Brands—would also see cost increases due to tariffs. Ben Hancock from Constellation stated the company has initiated plans to stockpile beer and limit price hikes as much as possible, but acknowledged the uncertainty remains as the situation evolves.
Gas prices are yet another area where Trump’s threats on tariffs might manifest. According to AAA, prices in Arizona increased by 29 cents per gallon following Trump’s inauguration. While the risk for immediate price hikes due to Canadian crude oil tariffs may be lower for Arizona—given the state’s reliance on refineries from California and Texas—the industry is poised for higher prices across the board if the tariffs remain long-term. Tom Pyle, of the American Energy Alliance, remarked, “Energy should not be subjected to tariffs. It would raise prices across the board.”
Housing and rental prices are projected to spike, contributing to the burden on already strained consumers. The explosive growth of new home constructions in Maricopa County might falter as the construction industry faces the uncertainty of rising materials costs due to tariffs on steel. Josh Tracy, from Ryan Companies, emphasized the need for clarity on how tariffs will affect builders, expressing concern over long-term impacts.
Tourism, which generated $2.6 billion for state tax revenue and provided 187,000 jobs, is particularly at risk, with Mexican visitors accounting for roughly one out of ten tourists to Arizona. Canadian Prime Minister Justin Trudeau suggested Canadians rethink vacations to the U.S. as part of their response to the tariffs, potentially resulting in lost revenue and jobs across the tourism sector.
After Trump announced the tariffs, Mexico and Canada quickly responded with threats of retaliatory measures. The Mexican government committed to deploying 10,000 National Guard troops to the U.S. border, and Canada promised to bolster initiatives targeting drug trafficking and trade integrity. Rajiv Biswas, CEO of Asia-Pacific Economics, commended Trump’s aggressive approach but noted potential long-term consequences of fostering ill will among trade partners.
Notably, economic projections indicate Trump’s actions could adversely affect U.S. GDP by over $75 billion if retaliatory tariffs are enacted. A recent study by Purdue University outlines how tariffs would exacerbate inflation, likely leading to higher prices and potential job losses. The economic ramifications intertwine with political tensions, as representatives like Jasmine Crockett express solidarity with both Canada and Mexico against Trump’s tariff threats.
Crockett pointedly stated, “They are really the ones speaking truth to power right now,” emphasizing the need for collaboration over confrontation. Her comments reflect broader sentiment among some lawmakers who view Trump’s tariff policy as reckless and detrimental to relationships within North America.
Trump’s readiness to impose significant tariffs, initially effective from April 1, is aimed at changing trading dynamics, urging automotive manufacturers to shift production to the U.S. The automotive sector, greatly influenced by the proposed tariffs, runs the risk of higher costs for manufacturers like Honda and General Motors. Honda has already considered relocating some production to mitigate these impacts, as tariffs would significantly increase the costs of using international components.
Overall, the potential for retaliatory tariffs, rising prices, and strained relations presents considerable challenges for the U.S. economy as it navigates this complex situation. Industry experts and economists alike warn against the likely repercussions of these trade tensions, emphasizing the need for strategic diplomacy over tariff threats to maintain stability and economic health.