President Donald Trump is poised to impose sweeping tariffs on America’s three largest trading partners—Mexico, Canada, and China—marking a significantly more aggressive approach to his favored economic tool than anything he pursued during his first term.
These impending import taxes will serve as a major test of Trump’s unconventional tariff strategy, which he has called “the greatest thing ever invented.”
This move represents a considerable gamble—arguably even greater than any economic policy he enacted during his more than four years in the White House. The consequences of this strategy could directly impact what many voters prioritize most: the economy and the cost of living.
However, Trump’s tariff plan carries a significant risk. It could backfire by driving up already-high consumer prices at grocery stores, destabilizing the fragile stock market, or even triggering job losses in a full-scale trade war.
“This may be the biggest own-goal yet,” said Mary Lovely, a senior fellow at the Peterson Institute for International Economics, in a phone interview with CNN. “This is a huge gamble. It’s a recipe for slowing down the economy and increasing inflation.”
The Wall Street Journal took an even stronger stance, publishing a sharply critical op-ed on Saturday titled: “The Dumbest Trade War in History.”
The article argued that Trump’s rationale for an “economic assault” on Canada and Mexico “makes no sense” and cautioned that the approach could lead to disastrous consequences.
A Different Landscape
Trump views tariffs as a potent negotiating tool, one that provides leverage over both allies and adversaries. He has defended their use as a means to tackle key issues, including the trade deficit, illegal immigration, and the flow of illicit drugs.
Supporters of Trump frequently cite, correctly, that the tariffs imposed during his first term did not lead to problematic inflation. However, the economic landscape has shifted dramatically since then.
On Saturday, Trump set in motion tariffs affecting $1.4 trillion worth of imported goods—more than three times the $380 billion in goods targeted by tariffs during his first term, according to estimates from the Tax Foundation.
During his initial presidency, inflation was not a pressing issue.
Today, however, the cost of living has soared across multiple sectors, from groceries to car dealerships. Consumers, investors, and Federal Reserve officials are now much more sensitive to even modest price increases.
‘Why Burn Your Own House Down?’
The White House has maintained that Trump’s tariffs will not pose a threat to the U.S. economy. Still, some economists and trade experts are deeply concerned, particularly given that these new tariffs target America’s closest neighbors, Canada and Mexico.
During his first term, Trump threatened to impose tariffs on Canada and Mexico but ultimately refrained from doing so after being dissuaded by his advisers.
Applying sweeping tariffs on these key trading partners could disrupt supply chains in the highly integrated North American economy, leading to higher costs for businesses and consumers alike.
“To impose tariffs as high as 25% on our closest trading partners risks decimating the North American economic powerhouse—which the U.S. relies on. Why would you want to burn your own house down?” said Christine McDaniel, a former trade official in President George W. Bush’s administration and now a senior research fellow at George Mason University’s Mercatus Center.
Potential FBI Chief – Kash PatelThe auto industry is particularly vulnerable to these tariffs, as car parts often cross the U.S. border multiple times before a vehicle reaches a dealership. According to Wolfe Research, these tariffs could increase the price of a typical car sold in the United States by approximately $3,000.
Impact on Grocery Prices
The oil industry has urged the White House to exempt crude oil from the tariffs, given that Canada is the largest foreign supplier of oil to the U.S. Analysts have warned that tariffs could lead to higher gasoline prices in the Great Lakes, Midwest, and Rocky Mountain regions. As a result, the White House opted to impose a 10% tariff on Canadian energy, rather than the full 25%.
Grocery prices, a major concern for voters in the most recent election, are also at risk. Mexico is the top foreign supplier of fruits and vegetables to the U.S., while Canada leads in providing grains, livestock, meats, and sugar/tropical products.
Lovely expressed confidence that these tariffs will drive up costs for consumers—especially for food and construction materials. While fluctuations in currency values might mitigate some of the price hikes, they won’t eliminate them entirely.
“It has to increase prices,” she said. “There’s no way you can just levy this tax and then suddenly, poof, this burden disappears – even though that’s what he wants to convince us is true.”
These price increases won’t happen overnight but will unfold gradually as they ripple through complex supply chains.
“It’s not like everyone will mark up their shelves tomorrow, and then it’s done,” Lovely explained. “You’ll see a slow pass-through to prices. One week it will be at the grocery store, another it will be at Home Depot.”
Beyond raising costs, increased tariffs—along with retaliatory measures from affected countries—could dampen both business and consumer spending while also unsettling investors and Federal Reserve officials.
According to estimates from EY chief economist Gregory Daco, Trump’s tariffs on Mexico, Canada, and China, combined with retaliatory tariffs, could reduce U.S. gross domestic product (GDP) growth by 1.5 percentage points in 2025 and another 2.1 percentage points in 2026.
“Steep tariff increases against U.S. trading partners could create a stagflationary shock—a negative economic hit combined with an inflationary impulse—while also triggering financial market volatility,” Daco wrote in a report on Friday.
‘Playing With Fire’
A key uncertainty is how the Federal Reserve will respond.
While Fed Chair Jerome Powell and his colleagues may overlook a temporary rise in prices, prolonged tariff-driven inflation could force the central bank to delay interest rate cuts further.
The primary concern for Fed officials will be whether tariffs alter consumer inflation expectations.
“If tariffs drive inflation expectations higher, the Fed may feel pressured to keep rates restrictive for longer, tightening financial conditions and weighing on growth momentum,” Daco warned in his report.
Of course, it remains unclear how these events will unfold, as multiple factors—including supply chain adjustments and consumer behavior—will influence the outcome.
A last-minute deal could still be reached before the tariffs inflict significant economic damage.
Nonetheless, imposing tariffs on such a vast range of goods at this scale is a high-stakes strategy—even more aggressive than anything Trump attempted in his first term.
“The administration is playing with fire,” said Joe Brusuelas, chief economist at RSM.
