by Edwin Quinabo
President Donald Trump’s tariffs have not taken full effect yet, but both consumers and businesses executives are spooked over developments.
The latest tariff schedule reported by Bloomberg news has 10% on all goods from China effective Feb. 4, a delay until March 4 on 25% on most goods from Canada and Mexico, 25% on steel/aluminum for most nations starting March 12 and a reciprocal tariff on all nations pending a review deadline on April 1.
The Economic Policy Institute says American households will bear most of the burden of tariffs in the form of higher prices on imported goods and for domestic goods that compete with imports.
The Petersen Institute for International Economics projected across-the-board tariffs could lower the U.S. economy by one percentage point by 2026 and boost inflation by two percentage points. If fully implemented, broad tariffs could cost the average American household $1,200 to over $2,600 a year. If consumers are making large purchases like a car or a home, that amount could be higher. Because most American cars are partially made in Canada and Mexico, a 25% tariff on Canada and Mexico would raise the price of cars by about $3,000, experts say.
Worse yet for middle-to-lower income Americans, economists say tariffs are a regressive consumption tax which means people with lower incomes will pay a larger share of their earnings in taxes than high-income people, making it difficult for those already struggling with inflation to meet additional costs for basic needs like food, clothes, transportation and energy.
“Trump’s proposed tariffs could add $272 billion a year to tax burdens,” said Karl Schamotta, chief market strategist at Corpay Cross-Border Solutions.
Hawaii Governor Josh Green told the Hawaii Filipino Chronicle, “Tariffs are likely to increase costs for our people, so his [Trump’s] approach could really hurt Hawaii residents. Tariffs on our allies like Canada, many of whom come to Hawaii, seem poorly thought out. I also have serious concern that this approach will increase the cost of housing, because the cost of materials will soar. That’s the last thing we need.”
U.S. Senator Brian Schatz told the Chronicle, “Prices for everything – including groceries – continues to rise. Hawaii is already one of the most expensive places to live and what the [Trump] administration should be doing is lowering costs, not raising them. But that’s exactly what tariffs will do. When the government places tariffs on imports, those taxes aren’t paid by the big corporations importing those goods. Like everything else, they pass those new taxes on to customers. That means higher prices for things like pork, cell phones, and vegetables. It’s bad for working people and small businesses in the Filipino community and across Hawaii.”
The Peterson Institute for International Economics said Trump’s aggressive tariff campaign will force American consumers to pay more for practically everything — from foreign-made sneakers and toys to food. They can also lead to trade wars, the Institute adds.
Trump on his tariffs
Trump said America needs a fairer trade policy that makes U.S. goods more attractive on the market. “The United States is one of the most open economies in the world, yet our trading partners keep their markets closed to our exports. This lack of reciprocity is unfair and contributes to our large and persistent annual trade deficit.”
He said, “I’m going to be announcing tariffs on cars and semiconductors and chips and pharmaceuticals, drugs and pharmaceuticals and lumber, probably and some other things over the next month or sooner.
“Prices could go up somewhat short term, but prices will also go down,” Trump said. “So, Americans should prepare for some short-term pain,” he added.
Historically, the U.S. has used tariffs to protect its manufacturing industry, farmers, technology and national security interests. In Trump’s first term, he used tariffs heavily, but experts say his second term proposals are like a wrecking ball because he’s said he’ll place tariffs on many goods broadly and even on goods that the U.S. doesn’t even produce.
Corporate America has lobbied hard against Trump’s tariffs because of fears of rising inflation and slowing down the economy. Last month, the Wall Street Journal’s editors, who typically side with the president’s policies, called Trump’s tariff plan “the dumbest trade war in history.”
Economists say if tariffs remain in place on a sustained basis, it could have long-term effects as some businesses could attempt to shift supply chains to other countries to avoid paying higher tariffs. As supply chains broke down during the height of the pandemic, economists point out recovering from supply chain disruptions could take years.
Hope for Congress to act
The White House says the President has broad authority over tariffs under the International Economic Emergency Powers Act.
U.S. Rep Ed Case told the Hawaii Filipino Chronicle, “Under our trade laws, a President does not have full authority over whether and how to impose tariffs. Under our Constitution, Congress has the power to regulate commerce, and under our trade laws Congress has a specific role on tariffs as well. So, Congress always has the right under our Constitution to oversee the administration, partner with it on specific trade policies, and ultimately direct the administration through our lawmaking authorities.”
He added, “I hope my Republican colleagues will decide to differ with the President and engage on effective and fair-trade policies. Either way, I will continue to join my fellow Democrats and any willing Republican in advancing more targeted and strategic use of tariffs that are tailored to specific national goals, that protect especially vulnerable businesses and workers from unfair trade practices by countries such as the People’s Republic of China, and that bring down the cost of living for businesses and consumers.”
Sen. Schatz calls on Hawaii residents to become active in the process. “While Democrats may not control Congress or the White House, we are not powerless. We have seen that when people across the country speak out against bad policies, the administration backs down. We’re doing everything we can in Congress to stop policies that will raise costs for people in Hawaii, but you can help. Your voice matters too. It’s important for everyone to be part of the political process.”
Across-the-board (broad tariffs), targeted tariffs (selected tariffs) and reciprocal tariffs
Across-the-board tariffs are broad and applies a uniform percentage reduction to all imports. While it can be a source of added revenue for the government, it could jolt world trade and set off trade wars, economists explain.
Targeted or selective tariffs are specific levies on certain goods or industries commonly used to protect a good or industry a country wants to boost.
Reciprocal tariffs refer to tariffs the U.S. government plans to levy against global trading partners that are equal to the existing tariffs foreign countries have set against American goods. They are designed to bring trade into balance.
Trump’s tariff plan is to utilize all three types of tariffs to varying degrees.
Case said, “First, I generally believe in fair and open trade among countries with a minimum of protective tariffs. I do believe in selective protective tariffs to defend national security interests, to deter aggression and to defend against unfair trade practices and their impacts on our domestic industries and American workers by other countries. But across-the-board tariffs for no good reason hurt both businesses and consumers alike.”
He added, “This is especially true in our Hawaii. where we rely on imports far more than virtually any other part of our country. These imports come directly from the mainland and directly and indirectly from overseas, and higher costs from higher tariffs are just passed along to our small businesses and families.
“Finally, when we impose a tariff on the import of goods and services from another country, the other country’s response is usually to also impose tariffs on the import of goods and services from our country. In the resulting trade war, it is not only our local businesses and consumers that are hurt, but our businesses and workers that export services and goods to another country. For us in Hawaii, this means many small businesses doing business with the countries of Asia and the Pacific, such as the Philippines and Japan.”
Case said, “Blanket across-the-board tariffs hurt businesses and families throughout our country regardless of whether they are represented in Congress by Republicans and Democrats, and so there is a lot of reasons why these issues and any disagreements with the President should be addressed in Congress on a bipartisan basis (and I regularly discuss these and other issues with my Republican colleagues). However, unfortunately thus far the Republican-majority Congress appears to be supporting the President’s tariff policies or at least to be afraid of disagreeing with him, so that there is no effective Congressional check and balance on disruptive and harmful trade policies.
Trump has repeated that imposing tariffs will fix the U.S. trade deficit. Josh Bivens, Research and Policy Director, Economic Policy Institute, Washington, D.C., said tariffs will not fix trade deficits “because high and broad-based tariffs will also reduce exports along with imports, and this will leave the balance of trade mostly unchanged. Exports fall when tariffs are introduced.”
Message to the President
Teresita Bernales, Kailua, message to President Trump: Do not make blanket policies, there is no ‘one size fits all’ for all of the U.S. States. Each community is unique. Hawaii’s residents already face one of the highest costs of living in the U.S. with housing, utilities and everyday goods already straining household budgets. The proposed tariffs on imported goods will further increase prices, especially items like food and consumer goods, restaurants and retail businesses, construction materials and housing, and tourism. etc. These increases will disproportionately affect Hawaii due to its heavy reliance on imports and will put heavy financial pressure on families and businesses. Policies that prioritize economic stability and affordability for island communities are critical to ensuring their well-being and sustainability.”
Marcus Salvador, Aiea, independent, said he voted for Trump expecting that Trump would bring down the cost of groceries and lower inflation. “So far, prices are still high, and it looks like he didn’t try to do anything to fix what he promised. If tariffs will make everything cost more, I’m starting to regret voting for Trump. But we have to wait and see. Right now, it’s just tariffs on China, but that percentage is not as high as he originally said it would be. Trump says things as threats but often do not make good on those threats. He might be bluffing.”
Tina Pascual, Ewa Beach, Democrat, said Trump is raising tariffs to raise money for the government so he can shove through an extension on the unpopular corporate tax cuts from his first administration that will be expiring. “Trump is all about helping the ultra-rich. I don’t think he can relate to the average American and our struggles. If he did, he wouldn’t be raising tariffs.”
Trump predicted during the annual meeting of the World Economic Forum, his tariffs would bring in hundreds of billions of dollars — perhaps trillions of dollars — into the U.S. Treasury.
The Tax Foundation estimates that the tariffs will generate around $100 billion per year in extra federal tax revenue. But it also said not only could tariffs drive up consumer prices but eliminate hundreds of thousands of jobs and hurt businesses.
Canada and Mexico
Case said, ““Take two of our state’s biggest crippling cost of living drivers, housing and food. Both would be hit very hard by President Trump’s proposed 25% across-the-board tariff on Canada and Mexico.
“Canada is one of the world’s largest producers of softwood lumber, and a 25% tariff on that product will pass through as an increase on the already high cost of constructing homes in Hawaii. Fully 80% of the fertilizer we use to grow crops in Hawai‘i comes from Canada, so the costs of buying locally-produced food will increase. Mexico is the largest supplier of fruit and vegetables to the United States, much of which is then shipped to Hawaii, so a 25% tariff on imported food will drive up those costs even further.”
Case added, “These tariffs will have a compounding effect on what is already a major domestic tariff on most all that we import from the mainland. A 105-year-old federal law called the Jones Act creates and maintains a monopoly on shipping that brings in more than 90% of our goods and unfairly boosts the cost of virtually everything for our businesses and families. I am working to exempt Hawaii and other parts of our country who rely virtually exclusively on shipping from this unfair federal law.”
Canada is prepared to retaliate against tariffs, if necessary. Canadian officials said some goods they’re targeting are ceramic products, steel products, furniture, certain alcoholic beverages like Bourbon and Jack Daniels whiskey, orange juice and pet food, among other goods. Canada is prepared to impose $30 billion in tariffs. According to the United States Department of Agriculture, 63.2% of U.S. agricultural imports come from Canada consisting of meat, animal products, grains and feeds, and oilseeds and oilseed products.
Mexican President Claudia Sheinbaum said they are placing on hold their own 25% retaliatory tariffs for now. Mexico is the United States’ biggest source of fresh produce, supplying more than 60% of U.S. vegetable imports and nearly half of all fruit and nut imports. A retaliatory tariff on the U.S. is bound to raise grocery costs, expert say.
Canada and Mexico are two of the top three U.S. trading partners. Gas prices could also surge as much as 50 cents per gallon in parts of the U.S. as Canada and Mexico supply more than 70% of crude oil imports to U.S.
Trump delayed tariffs on Canada and Mexico because of the two countries commitment to the U.S. to increase border security and stop the flow of undocumented immigrants. However, the President is still threatening tariff hikes on the two countries.
China
China is the U.S.’ third top trading country. Should a broad trade war roll out, key products expected to have price increases include electronics, clothing, toys, furniture, houseware, automotive parts. Companies like Apple, which rely on Chinese manufacturing for devices like iPhones and MacBooks, could increase prices as production costs rise. Car parts in the U.S. are also imported from China. With the already implemented 10% tariff, vehicle repair and maintenance costs could climb.
Bernales said, “China, Mexico and Canada have signaled retaliatory tariffs, and this will harm U.S. exporters and escalate trade tensions. Sectors that will be significantly affected by tariffs are automotive, semiconductors, consumer goods, agriculture, energy and green technology and basic materials (metals, wood and plastics) industries. The negative outcomes outweigh the intent of a fair trade balance.”
Consumer response
Experts say tariffs can dissuade buyers from purchasing goods from tariffed countries. In areas where product substitutes or cheaper alternatives are available, consumers will purchase substitutes. But eventually, those substitutes could follow market trends and also have their prices go up.
Businesses are worried that consumers will shop less because of added expenses to go toward basic goods. It will ultimately hurt their bottom line.
“We don’t have much of a choice if tariffs will expand to essential needs like food and gas. Increased tariffs will be added hardship for millions of Americans and Congress should do something about it. Trump cannot have his way and go unchecked. Trump ran on helping Americans with lowering our cost of living, not raising it,” said Pascual. “It’s frustrating and frankly frightening for many of us just barely making ends meet.
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