A Brief Summary of Current Tariffs and Their Impact

 In less than half a year, U.S. trade policy has experienced dramatic shifts. The Trump administration returned with a strong approach to trade; notably significant tariff increases, negotiations, a “trade war” with China, and some de-escalation.  

Upon returning to office, President Trump emphasized the need for more even trade with the U.S. and his willingness to use tariffs as a response to fentanyl and illegal immigration happening at the borders. On February 1, the administration announced a 25% tariff on most imports from Canada and Mexico. Tariffs on Chinese imports were raised by 10% on February 1 and March 3.  

Liberation Day, or April 12, brought a 10% universal tariff on most imports, excluding its neighbors Canada and Mexico. Higher reciprocal tariffs were put in place for about 60 countries. At this time, the tariffs on Chinese imports increased to 145% and China responded with a 125% tariff. One week later a 90-day pause was issued on some, but not the 10% universal tariff.   

Additionally, the brief trade war with China cooled off for another 90-day reprieve on May 12 when the U.S. and Chinese tariffs were reduced to 30 and 10% respectively.  

Tariffs significantly disrupt integrated supply chains such as the automotive and agriculture sectors.  The U.S. depends on lumber, electronics, and other industrial components coming from Canada. This can result in slowdowns in production and higher end costs for the consumer, ultimately leading to inflationary trends. 

Agriculture is hit hard with tariffs because export volumes tend to decline and inventory costs for producers rise. In an industry with historically low margins, this can be harder to recover from. According to the Global Agriculture Trade System total agriculture exports to Mexico from January to March are down 4% when compared to 2024, with products such as oilseeds and sugar showing a 16% and 14% decline respectively.

However, some commodities such as lamb and wool benefit from the tariffs. Producers cite the benefits of more competitive domestic prices with reduced competition from cheaper imports. Likewise, the onion industry views tariffs as an advantage for U.S. growers, especially when foreign produce is known to flood the market at lower prices.

The pressure to reach trade deals is on as the pause on tariffs expires this summer. The U.S. and U.K. reached an agreement on the Economic Prosperity Deal, notably eliminating tariffs on British airplane parts, reducing tariffs on British cars, removing all tariffs on U.S. ethanal, and an increase in U.S. beef imports.

A bilateral agreement with India is underway, with the Indian Trade Minister leading a delegation to Washington on May 17. Slower moving conversations include trade talks with the European Union and a review of the U.S.- Mexico- Canada Agreement (USMCA) brokered under the previous Trump administration.  

The only certainty right now is uncertainty. Trade tensions are high and news on many negotiations is yet to come. Global businesses and markets will continue to closely monitor developments. As the U.S. looks to diversify its trading partners, so will other countries negatively impacted by the instability of current trade conditions. Will we see more inflation, advantages to U.S. industry, or perhaps both?