President Trump’s potential return to office could lead to a major economic crisis in North America. He has suggested imposing a 25% tariff on all imports from Canada and Mexico, part of his plan to crack down on drugs and migrants at the U.S. border. If this happens, it could lead to a trade war that would affect the economies of the U.S., Canada, and Mexico.
Economic Risks of Tariffs
If the tariffs are imposed, they could seriously harm the economies of Canada and Mexico, possibly causing recessions. U.S. consumers would also feel the impact, with higher prices for products like cars, gas, and imported goods. Economist Joe Brusuelas warned, “This wouldn’t be a skirmish; it would be a real trade war,” which could lead to job losses and foreclosures.
However, some experts are skeptical. Goldman Sachs believes the chance of a 25% tariff is only 20%, pointing out similar threats from Trump in 2019 and 2024 that didn’t happen. Some see this as political rhetoric aimed at Trump’s supporters.
Impact on Gas Prices
Gas prices could rise sharply due to tariffs, especially in areas that depend on Canadian oil. Canada is the U.S.’s largest oil supplier, making up 71% of U.S. oil imports in 2023. A report warns that tariffs could raise gas prices by 20–50 cents per gallon in areas like the Great Lakes, where refineries rely on Canadian crude. This could undermine Trump’s promise to keep gas prices low.
Broader Economic Consequences
Economists estimate that a 25% tariff could reduce U.S. GDP by $200 billion, Canada’s economy by $100 billion, and slow Mexico’s growth by 2%. The automotive industry would face severe impacts, with car prices potentially rising by $3,000. This would hurt U.S. automakers who depend on cross-border supply chains.
Mexico, which relies heavily on U.S. exports, would be especially vulnerable. The tariffs could push Mexico into a recession and make illegal border crossings worse, directly undermining Trump’s immigration goals.
Retaliation and Escalation
Canada and Mexico would likely retaliate, further escalating the trade conflict. Canadian Prime Minister Justin Trudeau has already suggested counter-tariffs on U.S. products like steel and whiskey. Desmond Lachman from the American Enterprise Institute warned, “America isn’t an economic island.” The trade war could harm the U.S. economy too.
Need for Stability and Decision
The uncertainty around Trump’s tariff plan has left businesses nervous. Peter Boockvar from Bleakley Financial Group stressed that a quick decision is needed: “For the sake of stability, decide on tariffs quickly. The current uncertainty is paralyzing businesses.”
Trump’s tariff threat looms large over North America, with high stakes for businesses, workers, and consumers across the region.
