Note: this article is currently being updated based on the developing situation

The Opening Salvo

In a flurry of activity near the start of his second presidential term, Trump announced that new tariffs for Canada, Mexico, and China will indeed start March 4, 2025, after being postponed for one month.

“They’re all set,” Mr. Trump said. Canada, Mexico, and China are America's largest trading partners making up over 40% of U.S. imports.

Soon the world would find out this was just the beginning. Sweeping tariffs higher than anticipated would be imposed less than a month later sending global markets and economies into chaos mode.

So exactly how do the proposed tariffs affect companies, individuals and industries? What are potential consequences and mitigation strategies? This deep dive will cover all this and more.

President Trump’s first major tariff actions of his second term targeted new tariffs for Canada, Mexico, and China. Mexico and Canada both were levied a 25% tariff for all goods (with a lower 10% tariff on Canadian energy products). 

China's tariffs were raised to 20% across all products on top of any existing tariffs. Trump called it an "opening salvo."

The tariffs were imposed using emergency economic authority never before used for tariffs. The main rationale for the tariffs was to stem the flow of "illegal aliens and deadly drugs" like fentanyl. While progress was made on this front in the 30 day postponement period, it was not enough to ultimately stop the tariffs.

Reciprocal Tariffs

Later in March, President Trump stated he intends to levy reciprocal tariffs to all trade partners that enact tariffs (and non-tariff barriers) on the U.S. The administration would estimate and match the financial impact of all restrictions with other nations tit-for-tat.

“Very simply, if they charge us, we charge them,” Trump stated. He believes we are being ripped off by other countries and this action would make trade fairer.

In order to determine the tariff levels, Trump asked the Commerce Department and the U.S. trade representative to research how a tariffs plan could work. These studies were completed for April 2, 2025 or "Liberation Day" according to Trump. The Office of Management and Budget will also create a report to estimate the financial impact of the tariffs. Once the financial impact of tariffs and other barriers was determined, the U.S. created a reciprocal set of tariffs to attempt to even the balance of trade. Non-trade barriers such as quotas, subsidies, and value added taxed (VAT) restricting American exports were included in calculations. 

Liberation Day was the main event. Reciprocal tariffs were indeed imposed. The fully-loaded tariff rate was controversially calculated not directly by tariffs but as a function of the country's trade deficit with America. There was a 10% minimum across the board tariff for all countries (except Canada and Mexico). Therefore, even countries with no trade deficit with the U.S. got hit with a tariff. Countries with a larger deficit faced higher reciprocal tariff rates, up to 50%. The countries imposed with the highest tariffs were China, Japan, Germany, India, South Korea, Taiwan and Vietnam. The European Union was imposed a baseline 20% tariff.

As is Trump's modus operandi, this is likely the starting point of a negotiation. It has already led to some concessions. In early February, before a White House visit by Prime Minister Modi, India announced it would be voluntarily dropping tariffs. India has some of the highest tariffs on American exports, including motorcycles. 

Other countries with high tariffs that could be affected are Argentina, Brazil, Vietnam as well as several Southeast Asian and African nations. 

Tariffs Explained

International trade has historically been seen as a geopolitical strength and predictor of peace between nations. However, it is increasingly viewed as a vulnerability due to a reliance on foreign countries, allies and adversaries, in critical supply chains.

Tariffs are essentially taxes on certain goods and services imported from other countries. Tariffs make imported products from other countries more expensive when they cross the border into the U.S.

Do tariffs help American companies? It depends. Tariffs typically help U.S. companies manufacturing the exact same good (say steel) but hurt U.S. companies using the tariffed good as an input in production (say, they use steel for tractors like Caterpillar) since they pay more for raw materials.

Increases in tariffs can be partially offset by exchange rate adjustments as they can relatively strengthen the dollar and weaken foreign currency, resulting in less dollars needed to buy the good.

Sector Tariffs

Steel and Aluminum Tariffs

After the broad Mexico and Canada tariffs were postponed, President Trump turned to impose a new specific 25% tariff on all imported steel and aluminum from all countries. While this would help U.S. steel and aluminum producers, it would raise prices for American companies using these metals as inputs which in turn will raise prices for American consumers. 

Industries affected by this include the automotive industry, beverage manufacturers, construction, aerospace, appliance makers and more.

The largest suppliers of steel to the United States are Canada, Brazil, Mexico, South Korea, and Vietnam. The largest aluminum supplying nations are Canada, United Arab Emirates, Russia, and China. 

The plan is these measures will boost U.S. Steel, a company which has been in talks to be acquired by Nippon Steel, a Japanese company. The question is whether this is simply propping up a struggling company.

A study from the International Trade Commission showed that the financial costs of previous steel tariffs outweighed the benefits. While production increased 5%, the price of U.S. steel products jumped 166% from 2017 to 2021. This had major downstream effects on industries consuming steel such as construction. Trump officials state that tariffs were imposed in large part due to national security, which was outside the scope of this report.

Potentially affected foreign countries have signaled retaliation in response, including a proposed 25% tariff on American whiskey from the European Union. 

Autos

Starting April 3, all automobiles and automotive parts from all countries will carry a 25% tariff. 

Cars and parts that comply with the existing U.S.-Mexico-Canada Agreement, or USMCA, free-trade agreement will be exempt from tariffs.

Who pays tariffs?

To be clear, tariffs levied by Trump are not paid by foreign entities. Tariffs are paid by Americans, usually the firms that are importing the tariffed goods.

Companies often opt to pass on the cost to consumers (or other businesses they are selling to) by raising prices, yet this could decrease sales.

Why is Trump such a fan of tariffs?

First, it’s clear from the initial deals negotiated with Mexico and Canada, the goals are not purely economic. The tariffs were used as a negotiating chip to gain concessions in the form of border security from both neighbors. Both countries sent 10,000 individuals to the border to increase security.

Second, Trump wants to lower trade deficits. A deficit is when the U.S. buys more goods from a country than they buy from the U.S. This is not an inherently bad thing for America in the view of many economists.

Third, is reviving U.S. manufacturing. The first Trump term tariffs (many extended in Biden's presidency) had a negligible effect on jobs. To the earlier point, many U.S. manufacturers are hurt by tariffs since their products become more expensive to make which may decrease sales and lead to job cuts.

Fourth, it is a source of revenue for the government. Theoretically, the increase in revenue from tariffs could pay down the national debut or fund tax cuts as Trump has hinted at. While Tariffs in recent times have made up about 2% of U.S. current revenue, in the 1800's tariffs brought in close to 100% of revenue (there was no income tax yet).

Fifth, it could incent foreign manufacturers to build plants in the U.S. to avoid the tariffs. Many Japanese cars are made in the U.S. and perhaps the globally popular Chinese electric vehicles could start being made in the U.S. in a similar way. Taiwan Semiconductor Manufacturing Co. (TSMC) recently did announce plans for $100 billion in chip manufacturing plants in the U.S. after tariffs were announced. Apple subsequently announced a $500 billion investment for advanced manufacturing operations in Texas that is planned to create 20,000 jobs over four years.

Lastly, there are signs that Trump gains politically whether or not the economic impact is beneficial. There is a perception that Trump is fighting for the working class and doing something to stop the further hollowing out of manufacturing in America.

Critiques of the Trump Tariffs

There have been several critics of Trump's tariffs approach.

Economists Phil Gramm and Larry Summers believe "broad-based tariffs will impede economic growth, risk triggering a trade war, and inflict long-term harm on the economy" with Summers adding that it's "a self-inflicted supply shock."

Some say it's not economically efficient as it will artificially push American manufacturers to make products they are not truly competitive producing which will cause productivity, wages, jobs, and prices to suffer.

Even some in the manufacturing industry are critical including Jay Timmons, CEO of the National Association of Manufacturers, who said “a 25% tariff on Canada and Mexico threatens to upend the very supply chains that have made U.S. manufacturing more competitive globally.”

Countries and Industries Affected

Mexico

Trump is levying a 25% tariff on all imports from Mexico to the United States. Products that comply with the United States-Mexico-Canada Agreement (USCMA) free trade agreement are exempt.

Mexican President Claudia Sheinbaum promised retaliatory tariffs and other counter measures.

While tariffs were postponed for one month after an agreement was reached involving Mexico sending 10,000 troops to the U.S.-Mexico border to stem the flow of fentanyl, they went into effect on March 4th.

Canada

Canada will also face 25% tariffs on all exports to the U.S with the exception of USCMA-exempt items.

Canada has threatened retaliation with 25% tariffs on $100 billion of U.S. goods which could include beer, wine, vegetables, perfume, clothing, shoes, household appliances, furniture and possibly even withhold critical minerals. 

China

Trump's tariffs on China were raised an additional 10% in March to bring the total to 20%, and then increased an additional 24% on April 2 to bring the total baseline tariff to 54%. Tariffs from previous terms are added on top of this.

China’s Commerce Ministry enacted retaliatory countermeasures including extra 15% tariffs on several U.S. meat and produce products which will affect U.S. farmers when they kick in March 10. China also added 15 American companies to its export-control list, including drone maker Skydio and AI startup Shield AI. Additionally, 10 U.S. firms were placed on the "unreliable entity" list, restricting their trade and investment in China. Antitrust and antidumping probes of U.S. companies were launched as well as a largely symbolic WTO (World Trade Organization) lawsuit against the U.S. 

India

India leverages some of the most tariffs on American goods coming into their country. Reciprocal tariffs would hit them hard and they have already started to walk back from tariffs in anticipation of this move.

Other countries

Trump has brought up tariffs for other countries including Colombia, Russia, and the European Union based on reciprocal tariffs. Japan, Argentina, Brazil, and Vietnam are potential targets as well as several Southeast Asian and African nations. The United Arab Emirates is affected as a producer of aluminum.

While Trump has mentioned a 10% across the board tariff, targeted reciprocal tariffs seem to be the preferred approach currently.

Examples of U.S. Industries Affected

• Home Construction due to Canadian lumber
• Auto industry due to higher cost Mexican and Canadian parts
• Energy due to more expense gas from Canada
• U.S. advertising platforms like Meta and Google since less sales means less ads. Temu spent $2 billion on Meta ads in 2023
• Steel and aluminum manufacturers
• Alcohol, like Whiskey, if retaliatory tariffs are imposed

Any industry that uses the following:

• Steel or aluminum as a manufacturing input
• Smartphones and other electronics from China
• Fresh vegetables like avocados from Mexico
• Toys (Tonka Trucks could be $15 more expensive)
• Tools like hammers from China
• Prescription Drugs (U.S. imports $6 billion worth of pharmaceuticals from China)
• Meats and cereal from China

Unlike previous tariffs, there were almost no industry exceptions or carveouts for specific sectors.

How to mitigate negative affects of Tariffs

U.S. companies can, of course, switch to suppliers located in the U.S. if possible. Moving to U.S. manufacturers could be a pricier option and a significant disruption to the supply chain. If production shifted to the United States, it would also likely lead to higher prices but also the benefit from more wages and profits staying in America.

How about inflation and prices?

You may hear higher prices and immediately think: spike in inflation! This is likely but not always the case.

Over the initial 20 months of Mr. Trump’s tariffs in his first term, the Consumer Price Index inflation averaged 2.1%, almost the same as the 2.2% rate in the prior 20 months. Monetary policy (adjusting interest rates) has a much greater effect on inflation.

That said, most economist agree that prices do usually rise with tariffs but it's yet to be seen if this will be a one-time price increase or more inflation.

What happened in the first round of Trump tariffs?

What might be most surprising is how little effect the tariffs had. In Trump's first term, there was scarce positive or negative effect on economic growth or the trade deficit.

Trump's first term tariffs were imposed on 2/3 of Chinese goods, not all goods like the current tariff. Trump also had limited tariffs on Canadian and Mexican steel and aluminum for about a year. The U.S., Mexico and Canada (USMCA) trade deal averted tariffs on all goods from those countries.

Economically, the impact was limited. Take tariffs on washing machines, for example. Research shows tariffs helped create 2,000 manufacturing jobs in the United States via Korean-owned company opening up U.S. plants. But tariffs also increased the price of washing machines 12% for Americans making each job created cost consumers about $817,000.

Politically though it could be counted as a win for Trump. A sign he was fighting for American factory workers. It's telling that Biden extended many Trump tariffs in his presidency. Biden added many target tariffs focused on thwarting China's green tech industry.

Conclusion

Tariffs are a wide-ranging issue affecting many industries, companies, countries and individuals. Trendpublic will continue to keep an eye on tariffs that are proposed and levied by the Trump administration. As tariffs ramp up, we will estimate how these affect American companies and the broader world and how to limit any negative effects and maximize wins where possible.