How Donald Trump's tariffs could impact US consumers and the UK

Donald Trump has long threatened to slap tariffs on goods from Mexico, Canada and China. What are they and what do they mean for the UK?

The second-time president says he is imposing tariffs - taxes on goods imported into the US - arguing higher levies will help reduce illegal migration and the smuggling of the synthetic opioid fentanyl to the US.

On Saturday, the president confirmed he would subject Mexican and Canadian goods to the full 25% tariff - and Chinese imports to 10%. No extra UK taxes have been announced on the UK but consumers will be wondering what the effects will be.

Even if no tariffs are put on UK exports, consumers will be impacted by a trade war, if the levies on other countries take effect on Tuesday.

Economists widely believe that tariffs will raise costs in the US, sparking a wave of inflation that will keep interest rates higher for longer. The US central bank, the Federal Reserve, is mandated to act to bring inflation down.

More expensive borrowing and costlier goods and services could bring about an economic downturn in the US, the world's largest economy.

Read more:
Why has Trump targeted Mexico and Canada?
Canada and Mexico hit back with retaliatory tariffs

Global movements could hit the UK.

Forecasts from the National Institute of Economic and Social Research (NIESR) predict lower UK economic growth due to higher global interest rates.

It estimates UK GDP (a measure of everything produced in the economy) could be between 2.5% and 3% lower over five years and 0.7% lower this year.

The situation may not be worse for the UK even if tariffs are levied.

The UK doesn't send a lot of things to the US, instead exporting banking and consulting services which do not tend to be subject to tariffs.

Thinktank Centre for Inclusive Trade Policy said a 20% across-the-board tariff, impacting the UK, could lead to a £22bn reduction in exports from the UK to the US, with the hardest-hit sectors including fishing and mining.

US impacts

Canadian energy, including oil, natural gas and electricity, will be taxed at a 10% rate.

Although the Trump administration says the changes will boost domestic production, there will likely be wide-ranging negative consequences for the US consumer.

Economists argue supply chains will be disrupted and businesses will suffer increased costs - leading to an overall rise in prices.

Both Mexico and Canada rely heavily on their imports and exports, which make up around 70% of their Gross Domestic Products (GDPs), putting them at even greater risk from the new tariffs.

China only relies on trade for 37% of its economy, having made a concerted effort to ramp up domestic production, making it relatively less vulnerable.

Here we look at where US consumers will feel the biggest impact.

Avocados - and other fruit and veg

The US imports between half and 60% of its fresh produce from Mexico - and 80% of its avocados, according to figures from the US Department of Agriculture.

Canada also supplies a lot of the US's fruit and vegetables, which are mainly grown in greenhouses on the other side of the US border.

This means that increased tariffs will quickly be passed on to consumers in the form of higher prices.

The US still grows a considerable amount of its own produce, however, so the changes could boost domestic production.

But economists warn overreliance on domestic goods will see those suppliers increase their prices too.

Petrol and oil prices

Oil and gas prices are likely to be impacted - as Canada provides around 60% of US crude oil imports and Mexico roughly 10%.

According to the US Energy Information Administration, the US received around 4.6 million barrels of oil a day from Canada last year - and 563,000 from Mexico.

Most US oil refineries are designed specifically to process Canadian products, which would make changing supply sources complex and costly.

There has been some speculation Mr Trump may exempt oil from the new changes - but if he doesn't, the US could see an increase in fuel prices of up to 50 cents (40p) a gallon, economists have predicted.

Cars and vehicle parts

The US car industry is a delicate mix of foreign and domestic manufacturers.

The supply chain is so complex, car parts and half-finished vehicles can sometimes cross the US-Mexico border several times before they are ready for the showroom.

If this continues, the parts would be taxed every time they move countries, which would lead to an even bigger increase in prices.

To mitigate this, General Motors has said it will try to rush through Mexican and Canadian exports - while brainstorming how to relocate manufacturing to the US.

Electronic goods

When Mr Trump imposed a 50% tariff on imported washing machines during his first term in 2018, prices suffered for years afterwards.

China produces a lot of the world's consumer electronics - and smartphones and computers specifically - so the 10% tariff could have a similar effect on those devices.

The Biden administration tried to legislate to promote domestic production of semiconductors (microchips needed for all smart devices) - but for now, the US is still heavily reliant on China for its personal electronics.

This will mean an increase in prices for consumers unless tech companies can relocate their operations away from Beijing.

Boost for the steel industry

The sector that could feel the most benefit from the Trump tariffs is the steel and aluminium industry.

It has long been lobbying the government to put tariffs on foreign suppliers - claiming they are dominating the market and leaving US factories without enough business and at risk of closure.

Steel imports increasing in price would promote domestic production - and possibly save some of the plants.

But when Mr Trump increased steel tariffs during his first term, prices also increased - which business leaders said forced them to pass on costs and left them struggling to complete construction projects on budget.

Overall inflation

An increase in the prices of all these goods would inevitably lead to widespread overall inflation.

According to analysis by Capital Economics, the Canadian and Mexican tariffs would put inflation above 3% - which is much higher than the Federal Reserve's target of 2% - and the Chinese levies would see it rise even further.