New York (CNN) – Former President Donald Trump is preparing to impose sweeping tariffs on America’s three largest trading partners—Mexico, Canada, and China—marking one of the most aggressive economic moves of his political career.
It’s a high-stakes gamble. Trump, who once called tariffs “the greatest thing ever invented,” is now pushing an economic strategy that could drastically reshape trade, consumer prices, and financial markets.
A Bet That Could Backfire
Trump’s new tariffs are significantly broader than those of his first term, targeting a staggering $1.4 trillion in imported goods—more than triple the $380 billion taxed under his previous administration.
While he argues these tariffs will help reduce trade deficits and curb illegal immigration, critics warn they could have dire consequences.
- Higher Costs for Americans – Grocery store prices, already a top concern for voters, could climb as tariffs hit key imports like Mexican produce and Canadian meats.
- Stock Market Jitters – Investors are bracing for potential volatility, fearing that trade tensions could spark a full-scale economic slowdown.
- Job Losses & Inflation – Manufacturing and retail industries, deeply intertwined with global supply chains, may face disruptions that push prices higher and squeeze American businesses.
Mary Lovely, a senior fellow at the Peterson Institute for International Economics, didn’t hold back: “This may be the biggest own-goal yet. It’s a recipe for slowing down the economy and increasing inflation.”
“The Dumbest Trade War in History”?
The Wall Street Journal slammed Trump’s plan, calling it “The Dumbest Trade War in History.” The paper argues that hitting Canada and Mexico with tariffs makes no economic sense, warning it could trigger supply chain chaos and lead to higher consumer costs.
Christine McDaniel, a former trade official in the George W. Bush administration, put it bluntly:
“Why would you burn your own house down?”
Tariffs & the Economy: A Delicate Balancing Act
The impact of these tariffs won’t be immediate, but experts predict a slow, painful ripple effect across the economy:
- Automobile prices could jump by $3,000 per vehicle due to higher costs on imported parts.
- Gasoline prices may surge in the Midwest and Great Lakes regions as Canada remains the largest U.S. oil supplier.
- Retail and construction costs may rise as supply chain disruptions make imported goods more expensive.
The Federal Reserve’s Dilemma
A major unknown is how the Federal Reserve will react. If tariffs fuel inflation, the Fed could be forced to delay long-awaited interest rate cuts, tightening financial conditions and further slowing economic growth.
Gregory Daco, EY’s chief economist, warns of a “stagflationary shock”—a dangerous mix of economic slowdown and rising inflation. His estimates suggest the tariffs could wipe out 1.5 percentage points from U.S. GDP in 2025 and another 2.1 percentage points in 2026.
Playing with Fire
While it’s possible a last-minute deal could prevent the worst outcomes, Trump’s tariff strategy represents an unprecedented economic experiment.
Joe Brusuelas, chief economist at RSM, issued a stark warning:
“The administration is playing with fire.”
Will this bold move strengthen America’s economic position, or will it backfire spectacularly? The stakes couldn’t be higher.
