Since taking office in January, President Donald Trump has unleashed a wave of tariffs, creating a highly uncertain and volatile environment for brands and retailers to navigate.
This FAQ will be updated with the latest tariff news, and address the impact tariffs will have on consumer spending, retailers' operations and supply chains, North American economies, and global trade.
What tariffs are currently in effect?
As it stands, the Trump administration has imposed an additional 20% tariff on imports from China.
A 25% tariff on all imports from Mexico and Canada has been paused for all goods that fall under the USMCA treaty; that pause applies to roughly 50% of goods imported from Mexico, and 38% of those imported from Canada.
What tariffs are next on the docket?
- 25% tariffs on all steel and aluminum imports are scheduled to take effect on March 12.
- President Trump has threatened to impose reciprocal tariffs beginning April 2.
- A one-month pause on auto tariffs will also end on April 2.
- A 25% tariff on EU imports could also be implemented shortly, although no date has been set.
How have other countries responded?
China’s retaliatory actions include a 15% tariff on US imports of chicken, wheat, and corn, as well as a 10% levy on soybeans, pork, beef, and fruit.
Canada’s retaliatory tariffs target over $20 billion worth of US imports, including wines and spirits, appliances, and apparel.
Understanding Tariffs
What is a tariff, and how does it work?
A tariff is a tax imposed on imported goods. Governments use tariffs to protect domestic industries, encourage local consumption, or as leverage in trade negotiations. Tariffs increase the cost of imported goods, which businesses often pass on to consumers through higher prices.
Who pays for tariffs imposed by the US?
US businesses that import goods pay tariffs, but these costs are typically passed down to consumers through price hikes or product shrinkage (shrinkflation). Lower-income households often bear the heaviest burden, as they spend a larger portion of their income on essentials.
How long does it take to implement a tariff, and how long do they last?
Tariffs imposed through executive action can take effect immediately or within weeks. Those requiring congressional approval may take months to a year. Tariffs can remain in place indefinitely, depending on political and economic conditions.
Trump’s Tariff Strategy and Its Implications
Why does President Trump want to impose tariffs?
Trump views tariffs as a tool to pressure countries into renegotiating trade deals, tightening border security, and addressing drug trafficking. He believes higher import costs will incentivize US companies to bring manufacturing jobs back to the US.
How do Trump’s current tariffs compare to his first-term policies?
During his first term, Trump focused on China, imposing hundreds of billions of dollars in tariffs. His second-term strategy is much broader: As many as 200 countries could be impacted by proposed reciprocal tariffs, while some goods—including steel and aluminum—could be subject to tariffs no matter their point of origin.
The Trump administration is also relying more heavily on tariffs as a negotiation tactic to address immigration and drug trafficking, which means they could either be quickly ramped up or scaled back depending on the government’s aims.
Impact on US Businesses and Consumers
How will tariffs affect consumer spending in the US?
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76% of US consumers plan to reduce spending if tariffs raise prices.
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Dining out will be hit hard—50% will cut back on fast food, and 46% on sit-down restaurants.
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Discretionary spending on clothing (44%), live entertainment (43%), and travel (39%) will also decline.
How will tariffs affect US automakers?
- The North American automotive supply chain is deeply integrated—many car parts cross borders multiple times before final assembly.
- Tariffs could increase the cost of a new car by $3,000 on average, and $10,000 for larger vehicles imported from Canada and Mexico.
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General Motors, Stellantis, and Ford are among the automakers facing significant production disruptions, potentially leading to plant closures. The administration on March 5 exempted US automakers from new tariffs on Mexican and Canadian imports for one month.
Could tariffs cause the US auto industry to crash?
Yes. Tariffs would make vehicles more expensive, disrupt supply chains, and force automakers to absorb losses. Some industry leaders warn that tariffs could make vehicle production in North America unviable.
How will tariffs impact major retailers?
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Target expects to raise food prices immediately and warns of weaker discretionary spending.
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TJX (owner of TJ Maxx and Marshalls) sees tariffs as an opportunity, as consumers seek discounts amid higher prices.
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Loblaw (Canada’s largest grocery chain) predicts shoppers will switch to private-label brands if prices rise.
How will tariffs affect international ecommerce?
- Trump’s 10% tariff on Chinese imports could significantly impact Chinese retailers like Temu and Shein, which rely on low-cost goods to compete in the US.
- The elimination of the de minimis exception, which allowed duty-free shipments, further raises costs for Chinese retailers.
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Meta’s ad revenues could suffer, as Chinese advertisers like Temu and Shein account for 11% of its ad spend.
How will tariffs impact the US economy?
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GDP growth is expected to slow as tariffs increase consumer prices and reduce spending.
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Consumer confidence is falling, particularly among Democrats who are more concerned about tariff-driven inflation.
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Buy now, pay later (BNPL) services are expected to see growth as consumers look for ways to manage rising costs.
Could tariffs trigger a trade war with Canada and Mexico?
Yes. Canada has already retaliated with tariffs on $21 billion of US goods. Mexico is considering similar measures.
How US Brands Can Adapt to Tariffs
How can brands mitigate the impact of tariffs?
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Audit supply chains to identify vulnerabilities and reduce dependency on tariffed imports.
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Increase automation to cut production costs and offset tariff-related expenses.
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Emphasize brand value to prevent consumers from trading down to cheaper alternatives.
Could US brands lose market share to European and Asian competitors?
Yes. European and Asian companies benefit from trade agreements that exclude tariffs, making their products more attractive to Latin American consumers.
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Apparel and footwear: Shoppers may swap Levi’s and Nike for Zara, H&M, and adidas.
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Consumer electronics: Apple and Dell could lose market share to Huawei, Samsung, and Xiaomi.
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Automobiles: Ford and Tesla could face stiffer competition from Toyota, Volkswagen, and BYD.
How will consumers in Latin America react to higher prices on US goods?
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Less affluent consumers will switch to local or private-label brands.
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Wealthier consumers may justify price increases for premium brands like Apple and Chevrolet.
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Overall spending on US brands may decline as consumers seek better value elsewhere.
How should marketers adjust their strategies?
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Retailers should focus on essentials and promote cost-saving measures.
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Brands should reinforce value messaging to justify higher prices.
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Companies should monitor political shifts and adjust supply chains accordingly.
Final Takeaways
What is the broader impact of Trump’s tariffs?
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US consumers will face higher prices on everything from groceries to electronics.
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The auto industry is at risk of significant disruption, with potential layoffs and factory closures.
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Retailers must brace for changes in consumer behavior, with more shoppers prioritizing necessities over discretionary purchases.
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Trade tensions could reshape global markets, with Latin American countries forging closer ties with Europe and Asia.
What can businesses do to prepare?
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Diversify supply chains to avoid reliance on tariffed goods.
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Enhance pricing strategies to balance cost increases with consumer affordability.
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Stay flexible and informed as trade policies shift under the Trump administration.