Canada, Mexico tariffs create ‘ripple effects’ on consumer prices

Tariffs on Canada and Mexico took effect Tuesday — and they’re bound to raise prices for consumers, sometimes in unexpected ways, according to economists.

Tariffs are a tax on foreign imports, paid by the U.S. entity importing a particular good.

President Donald Trump on Tuesday imposed a 25% tariff on Canada and Mexico, the two largest trading partners of the United States. Trump set a lower 10% tariff on energy from Canada.

Businesses typically pass along some of the additional cost of tariffs to consumers, economists said.

Certain products such as fruits and vegetables from Mexico and oil from Canada — which are among their major exports to the U.S. — will get more expensive as a result, economists said.

But there are also far-reaching impacts across supply chains that aren’t as clear-cut, they said.

“Tariffs create ripple effects that move through complex supply chains in ways that aren’t always obvious,” Travis Tokar, professor of supply chain management at Texas Christian University, wrote in an e-mail.

Such dynamics make it challenging to predict precise product and price impacts, Tokar said.

Take a fast-food chicken sandwich, for example. While none of its ingredients may come directly from Canada or Mexico, the aluminum foil used in its packaging might — driving up costs that could be passed on to consumers, Tokar said.

Nearly everything consumers buy is transported by trucks fueled by refined oil products — meaning the impact of tariffs on crude oil from Canada “could be much broader than it appears at first glance,” Tokar said.

The U.S. sources almost half of its foreign fuel from Canada, according to the Peterson Institute for International Economics.

“Costs eventually have to go through the supply chain” to the end consumer, said Mary Lovely, a senior fellow at the Peterson Institute for International Economics.

The U.S. traded $1.6 trillion of goods with Canada and Mexico in 2024, accounting for more than 30% of total U.S. trade, according to Census Bureau data as of December.

Tariffs on Canada and Mexico are expected to cost the average American household $930 in 2026, according to a January analysis by the Urban-Brookings Tax Policy Center.

The levies would cost the typical household $1,200 a year after also accounting for tariffs on China, according to a PIIE analysis. The analysis considered only a 10% tariff on imports from China that Trump imposed in February; he put another 10% tariff in place Tuesday.

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That PIIE assessment of consumer impact is “conservative,” said Lovely.

For one, it doesn’t factor in how domestic manufacturers would likely respond to less foreign competition, she said.

“These tariffs will…