President Donald Trump’s tariffs on imports from Canada, Mexico, and China are expected to reignite inflation and deal significant blows to the economy. The 25% tariff on Canadian goods and a 10% tariff on Chinese goods will go into effect Tuesday, with some exemptions.
Economists predict that these tariffs will push inflation to 3% by the end of the year, higher than the Federal Reserve’s target of 2%. Core inflation, which excludes food and energy items, is expected to fall from a high of 5.6% in early 2022.
While tariffs may reduce imports, they would strengthen the dollar, making foreign goods less expensive for consumers. Companies could also absorb some costs through profits, but this would not fully offset the impact on inflation.
The tariffs are likely to lower economic growth by 1.2 percentage points, from 2.6% to 1.4%, forcing consumers to reduce spending and dampening U.S. exports. This would lead to a softer labor market, with an unemployment rate averaging 4.5% this year, higher than without the tariffs.
The Canadian Prime Minister has promised a forceful response if the tariffs go ahead, while China is also planning “countermeasures”. The overall impact of the tariffs could be eased by exemptions, but experts warn that these measures would not mitigate the significant economic blow.
Source: https://eu.usatoday.com/story/money/2025/02/01/trumps-tariffs-economy-effects/78100179007