SAN ANTONIO – A local economist and the National Retail Federation say the Trump administration’s proposed tariff policies on $3 trillion of U.S. imports, which could boost domestic manufacturing and create more jobs, will likely raise consumer prices.
Mexico has been the target of Trump’s tariff proposals in an effort to curb drugs and illegal immigration coming into the U.S.
“If they don’t stop this onslaught of criminals and drugs coming into our country, I am going to immediately impose a 25% tariff on everything they send into the United States of America,” Trump told supporters while campaigning in North Carolina earlier this month.
At an October rally, Trump said he deterred a Chinese vehicle plant from being built in Mexico by threatening with tariffs.
“If they do this plant in Mexico right near the border and a couple of others, I’m going to put giant tariffs out of 100%,” he told supporters in Michigan. “And if that doesn’t work, I’ll go to 200%. I don’t care. They’re not going to be selling cars here. Now, if they want to build their plant here — I hope here. But at least in the United States, someplace in the United States, it’s a whole different ballgame. But we’re not going to have them building them in other countries, sending them into the United States, taking all those jobs.”
Tom Tunstall, an economist and senior research director with the University of Texas at San Antonio’s Institute for Economic Development, said the U.S. lacks the industrial capacity to immediately produce the goods these tariffs target.
“It could take as long as a decade to build out the industrial capacity necessary to produce products that we’re currently importing because they are less expensive,” Tunstall explained.
Economic Risks for Consumers and Retailers
A recent National Retail Federation (NRF) study analyzed six key product categories likely to be affected by the proposed tariffs: apparel, toys, furniture, household appliances, footwear, and travel goods. (See full study below.)
The study simulated a scenario where universal tariffs range from 10% to 20% for all foreign imports, with added rates of 60% to 100% for Chinese goods.
Jonathan Gold, the NRF’s vice president of supply chain and customs policy, warned of the financial strain on consumers.
“Unfortunately, consumers could see significant price increases because of the tariffs. That’s going to reduce their ability to spend on those products. They’re going to cut back on their spending, focus more on essentials as opposed to discretionary products,” Gold said.
Some companies are stockpiling goods to mitigate potential supply chain disruptions, but this approach has drawbacks. According to Tunstall, stockpiling ties up cash flow and risks inventory obsolescence or damage. “One of the reasons companies generally prefer to keep inventories lower is it ties up cash flow,” he noted.
Walmart CFO John David Rainey told CNBC last week that the new tariffs could force the retailer to raise prices.
The CFO for home improvement retailer Lowe’s, Brandon Sink, told investors last week that 40% of the company’s cost of goods sold are sourced outside of the United States, and the tariffs would add to those costs, but the timing and details were still uncertain.
Potential Policy and Market Implications
Tunstall said the Federal Reserve might adjust its interest rate strategy if inflation rises due to higher costs for goods. The central bank may reconsider planned rate cuts in 2025.
Trump’s plans are still proposals and would not be fully implemented until after his inauguration. The total economic effects will depend on how the policies are implemented and whether industries can adapt to increased demand for U.S.-made goods.
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