Trade War 2.0? Why Trump's Tariff Plans Could Be Worse Than 2018

President Donald Trump‘s latest tariff threats against America’s three largest trading partners could cost U.S. households an average of $800 in 2025, according to a report, marking an escalation from his first-term trade wars.

While Trump temporarily delayed tariffs on Mexico and Canada for 30 days, he moved forward with a 10% tariff on Chinese imports. According to The Economist, the whiplash approach to trade policy is creating dangerous uncertainty in global markets.

The proposed tariffs would hit a broader range of consumer goods than Trump’s first-term measures. “iPhones, iPads, tablets, laptops — all of that from Apple would now be hit, which is kind of a big escalation compared to how consumer goods were shielded from most of the first trade war tariffs,” Erica York, vice president at the Tax Foundation which issued the report, told NPR.

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The impact could be particularly severe for U.S. automakers. A 25% tariff on Canadian and Mexican imports would eliminate profits for Stellantis STLA, General Motors GM and Ford F if they took no compensatory actions, according to Barclays analysis cited by The Economist.

Some vehicles cross North American borders up to seven times during production, with no mechanism to prevent multiple tariff charges, Robert Asselin of the Business Council of Canada told The Economist.

Beyond auto manufacturing, the ripple effects could destabilize supply chains. Small parts suppliers lacking capital to cover higher costs might halt production or go bankrupt, The Economist said. “The problem is math. Price becomes a choke point. When something is not viable anymore, it just breaks down,” Asselin said to The Economist.

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Analysts at Jefferies estimate the combined tariffs would add about $2,700, or 6%, to average U.S. vehicle prices. Gas prices could also rise 10-20 cents per gallon under a 10% tariff on Canadian crude, particularly affecting the Midwest and Mountain West, where “100% of imports going into those two areas come from Canada,” Cato Institute vice president of general economics Scott Lincicome said to NPR.

The tariffs would also hit groceries in the U.S.. Mexico supplies almost two-thirds of U.S. vegetable imports and about half of fruit imports. Construction costs would rise too, as over 70% of softwood lumber and gypsum imports come from Canada and Mexico, according to NPR.

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China has already announced retaliatory measures, including 15% tariffs on American coal and liquefied natural gas, and 10% on crude oil and farm equipment, effective Monday.

Economic research suggests trade uncertainty during Trump’s first term reduced U.S. investment by at least 1% in 2018 alone. The Economist said this round of tariffs covers “both far more of the world and a far larger slice of America’s industrial landscape.”

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