January 31, 2025
Canada and Mexico plus 25%. And China plus 10%.
President Trump said those are the tariffs he will be slapping on those countries starting tomorrow February 1st. I’m going to tell you what this will likely mean for your wallet in a second. But first — here’s why he’s doing it.
Ok – a few caveats before I really get into this. And yes — I’m going to talk about the myth that tariffs are going to eliminate your federal income tax and I’m going to explain the talking point that tariffs will increasing American manufacturing at the end of this video, so stand by for those facts. But the caveats you need to know about these new trump tariffs — one – we do not know yet if president trump will make tariff exceptions for certain types of products or goods imported from Canada, Mexico or China. Presidents make tariff exceptions all the time. But when specifically asked if certain products or goods from Canada, Mexico or China will not have tariffs on them — Trump’s press secretary today could not give any specifics about whether that was a possibility. And the other caveat – some are suggesting that maybe president trump is using the threat of tariffs on these countries as some sort of negotiating tactic and maybe he won’t actually follow through tomorrow. Trump says that is not the case.
Ok – the other thing you must understand is – generally *you* are the one who pays for tariffs. Not Canada, not Mexico, not China. If that is confusing to you I did a super deep dive on trump’s tariff plan a few months ago and I highly encourage you to go watch it. On a basic level a tariff is a tax. Let’s take lumber from Canada as an example. If that 25% tariff is placed on Canadian lumber, the American importer who orders that lumber and brings it into the United States will be the one who pays that 25% tariff to the US government. Now – you know how American companies work – think logically here — do you think that American company who just paid an additional 25% tax on a piece of lumber is just going to eat that cost? No. Of course not – they won’t jeopardize their bottom line – so they are going to pass that 25% tax on to you when you buy that piece of lumber from them. Does that make sense. It’s not uncommon for presidents to put tariffs on stuff coming into our country….what’s unusual here is the volume of tariffs trump is talking about and the fact that he is putting in jeopardy a trade deal that he himself put in place with Mexico and Canada when he was in office last time. Not to mention this move by trump could spark what are called retaliatory tariffs and a trade war with China, Mexico and Canada – but that’s a whole different conversation and I do have a video about that too.
So now let’s talk about what kind of stuff you use every day that could be subject to these tariffs. According to the US government Mexico, China and Canada are the countries we import the most stuff from. The Census Bureau says in 2024 we imported almost $467 billion of goods from Mexico, more than $401 billion of goods from China, and more than $377 billion of goods from Canada. I want to focus this video specifically on Mexico and Canada because – if Trump’s threats become real — they’re going to get hit with the highest tariffs and they are our direct neighbors and we do a lot of trade with them.
Let’s start with food — according to the USDA — Canada and Mexico are the United States’ first and third largest suppliers of agriculture products. Mexico supplies the United States with 31% of its fruit, vegetables and alcoholic beverages. Most of our avocados and tomatoes come from Mexico. And Canada is a major source of grains and meats.
Speaking of Canada – let’s talk about oil. According to the United States energy information agency – from June to November of 2024 the United States imported an average of more than 140 million barrels of crude oil per month from Canada which of course gets refined into the gasoline you put in your car. That is almost four times the amount of oil we imported from all of OPEC+ countries combined in that same time period. So yeah – we get a most of our oil from Canada. For the record, we also get oil from Mexico, but it’s less than what we import from OPEC+.
Let’s talk about cars and trucks. We get a large number of those from Canada and Mexico and adding a 25% tariff could not only raise the price of new cars – but could also jack up the price of used cars already being sold in this country because the demand for those would go up. We also get a lot of our plastics, furniture, pharmaceuticals and as I mentioned, lumber from Canada. And from Mexico, we import a lot of other types of machinery and electronics. All of those things could be subject to that 25-percent tariff.
Look — tariffs absolutely have a real function and they can help especially when it comes to punishing countries for deceptive trade practices or saving specific American industries…but it’s a balancing act. On one side – a president has to weigh how much do you want to punish foreign imports and use tariffs as trade leverage and on the other side — how much do you want to financially impact the American public with increased prices. It’s a delicate balancing act.
And before you say anything about how trump’s doing this so you don’t have to pay federal income tax anymore or this is going to make imports so expensive that American companies are going to magically start manufacturing stuff here and create more jobs…here are the facts. We have decades of research on tariffs that prove everything I’m about to tell you. The reality is – while maybe that worked in the early 1900s, there is no recent evidence that shows American companies are going to manufacture all those goods here. It’s really expensive to manufacture here in the US and in the end – its probably going to be easier and cheaper for those American companies to just import the cheaper product from abroad, pay the excessive tariff and just charge you more for it. And if you think these new trump tariffs are going to bring in so much revenue to the United States that your requirement to pay federal income tax is going to go away — I hate to break it to you, but the number don’t pencil out. According to the congressional budget office – over the last 70 years tariffs have never accounted for more than 2% of the total federal revenue. According to the treasury department your individual federal income taxes made up almost 50% of the total federal revenue in fiscal year 2024. So – clearly that potential tariff revenue is not going to replace your federal income tax.
Watch Trump talk about tariffs on January 30, 2025 here.
Watch Trump talk about tariffs on January 31, 2025 here.
Read more from USDA here.
Read more about countries that trade with the United States here.
Read more from US Census Bureau about imports from Canada here.
Read more from US Census Bureau about imports from Mexico here.
Read more from US Census Bureau about imports from China here.
Read more from the Energy Information Administration about oil imports here.
Read more from Treasury Dept. about FY 2024 tax revenue here.
