How Would Your Week Change if Prices Suddenly Increased?
It’s a distinct possibility, especially if the much-discussed tariffs are implemented in the coming months.
We have a new president—or an old president, depending on how you look at it—and he has a different approach than his predecessor. While President Trump has only been back in office for a short time, he’s already enacted an avalanche of changes. These range from ending remote work for government employees to placing individuals working in diversity, equity, and inclusion offices on leave.
The Impact of Tariffs on Everyday Prices
One of the most anticipated policy moves—because it directly impacts our daily lives—is tariffs. We’ve previously discussed this administration’s affinity for tariffs, and now President Trump is in a position to enforce them.
As a reminder, tariffs are essentially an import tax on goods from other countries. Companies that import products pay this tax and, in response, raise the prices of their goods to make up for the loss in profit. In effect, consumers end up paying more for the same products due to the tariff—similar to an increase in sales tax.
What We Know About the Proposed Tariffs
President Trump is considering implementing tariffs on products from Mexico, Canada, and China. Specifically, he has proposed a 25% tariff on goods from Mexico and Canada—the United States’ two largest trading partners—and a 10% tariff on goods from China.
At this stage, details remain unclear. We do not yet know which specific goods will be affected, when these tariffs will be implemented, or why the proposed percentages were chosen. Additionally, tariffs on goods from other countries remain a possibility.
The Expected Consequences: Higher Prices for Consumers
Economic experts nearly unanimously agree that these tariffs will lead to higher prices for consumers. This policy shift follows recent inflation concerns and a decline in the purchasing power of the dollar, making household budgets even tighter.
The Logic Behind Tariffs
The rationale behind tariffs is that by making imported goods more expensive, companies will be incentivized to establish domestic production facilities. Typically, manufacturing in the U.S. is more expensive than in countries like China, which is why much of it has been outsourced. However, by making foreign-made goods more costly to import, the administration hopes to encourage manufacturers to relocate production back to the U.S.
Will This Strategy Work?
Only time will tell. Companies may choose to absorb some of the cost rather than pass it entirely to consumers, or they may opt to shift production back to the U.S. However, if history is any indication, consumers should prepare for higher prices at the store if these tariffs are implemented.
For now, keep a close eye on your Money Buckets and continue to speak the language of money to stay ahead of financial shifts in the market.
