Denver 7: Colorado economist says Trump tariffs will lead to higher prices for consumers
November 26, 2024
DENVER — With under two months until he takes office, President-elect Donald Trump is pledging to make good on one of his biggest campaign promises — tariffs.
Trump announced in posts on social media Monday night that he plans to place a 25% tariff on all products coming into the U.S. from Mexico and Canada, citing the thousands of people pouring over the border along with drugs like fentanyl.
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“This tariff will remain in effect until such time as drugs, in particular fentanyl, and all illegal aliens stop this invasion of our country,” Trump wrote. “Both Mexico and Canada have the absolute right and power to easily solve this long-simmering problem.”
Trump also said he’ll place an additional 10% tariff on China.
“I have had talks with China about the massive amounts of drugs, in particular fentanyl, being sent into the United States – but to no avail,” Trump wrote. “Representatives of China told me that they would institute their maximum penalty, that of death, for any drug dealers caught doing this but, unfortunately, they never followed through, and drugs are pouring into our country, mostly through Mexico, at levels never seen before.”
Dr. Kishore Kulkarni, a distinguished professor of economics at Metropolitan State University of Denver, said Canada, Mexico and China are major trading partners for the U.S.
“They are simultaneously big traders and they're the biggest traders with us,” said Kulkarni.
He said nearly half of all the goods the U.S. imports are from Canada, Mexico and China. The three countries provide the U.S. with electronics, car parts, plastics, pharmaceuticals and metals, among many other goods.
Kulkarni said placing tariffs on those countries will lead to higher prices for American consumers.
“I think our businesses that compete with foreign businesses, they probably like that step, but consumers won't because consumers will have to pay higher prices,” Kulkarni said.
Just how quickly would prices rise? Kulkarni said that depends on how fast the tariffs are imposed.
“If we phase them [in] little by little, there will be inflation, little by little. If we put them right on the second week of a new administration by 30%, 25%, then we will have a pretty big increase in price,” he said.
Despite the price increases that economists predict, Trump and his supporters, like Colorado Congresswoman Lauren Boebert, believe the tariffs won’t hurt ordinary Americans. Trump also believes tariffs can and will help bring back homegrown manufacturers and protect American industries.
“I don't believe that the economists have this right,” Boebert said. “President Trump has challenged some of these top economists, who are making these claims. And I would agree with him that it liberates the American worker and our economy here in America more than it would ever harm us.”
Kulkarni said history proves tariffs lead to higher prices for consumers.
“We have enough economic proof to show that that is not a good idea, economically speaking,” said Kulkarni. “Zero tariff is probably the best tariff.”
During the first Trump administration, the president threatened to impose steep tariffs on China. While Trump imposed some tariffs on China, they weren't as steep as he was threatening. In fact, President Joe Biden kept many of the tariffs against China in place.
Economists said Trump's actions could potentially lead to a trade war, which would hurt consumers in all of the countries, including in the U.S.
Kulkarni believes despite Trump's threats against Canada, Mexico and China, cooler heads will prevail.
"I think the most rational thing to say is that we won't have any tariffs," Kulkarni said.