US Tariff Plan Would Cut GDP Growth, Swell Inflation
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Navigating Washington: Insights for Business

US Tariff Plan Would Cut GDP Growth, Swell Inflation

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The White House announced plans to impose 25% tariffs on imports from Canada and Mexico and an additional 10% tariff on imports from China beginning February 4, before postponing the Mexico and Canada tariffs for 30 days. This article discusses the economic implications of tariffs, including weaker growth in both the US and the targeted countries, higher inflation, and disruptions to global supply chains.

Key Insights

The White House announced plans to impose 25% tariffs on imports from Canada and Mexico and an additional 10% tariff on imports from China beginning February 4, before postponing the Mexico and Canada tariffs for 30 days. This article discusses the economic implications of tariffs, including weaker growth in both the US and the targeted countries, higher inflation, and disruptions to global supply chains.

Key Insights

  • The administration’s executive order indicates intent to impose tariffs on goods from China, Canada, and Mexico, citing perceived threats posed by drugs and individuals entering the US illegally.
  • These proposed tariffs impact a wide variety of US consumer and business goods. Together, goods from Canada, Mexico, and China make up 41% of US imports.
  • These tariffs would affect key products such as grocery items, oil, automobiles, building materials, electronics, and manufacturing inputs, including critical minerals.
  • The combined effects of the initially stated tariffs on the three countries may result in as much as a 0.9 percentage point cut to the US’ real GDP growth over four quarters and lower GDP for the targeted economies, as well as a potential 0.6 percentage point rise in US inflation over four quarters.
  • Businesses should consider identifying alternatives for products and inputs, seeking exemptions from tariffs for critical products, and evaluating their supply chains for possible diversification and reorientation.

Authors

Dana M. Peterson

Dana M. Peterson Dana M. Peterson

Chief Economist and Leader, Economy, Strategy & Fi…
The Conference Board

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Erin McLaughlin

Erin McLaughlin Erin McLaughlin

Senior Economist, ESF Center
The Conference Board

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