Will Trump Actually Implement His New Tariff Plan?

Key Takeaways

• President-elect Donald Trump announced a new plan for steep tariffs on Mexico, Canada and China Monday evening.
• Politicians sometimes threaten tariffs to get other countries to change their policies.
• Some economists believe Monday's announcement is an attempt to bargain with some of the U.S.'s largest trade partners rather than tax their imports.

Whether President-elect Donald Trump will implement his new tariff proposals is a pressing question for the economy's trajectory.

On Monday evening, Trump promised to implement new steep tariffs on products from Mexico, Canada, and China on his first day in office. The tariffs would charge a 25% tax on imports from Mexico and Canada and an additional 10% tax on Chinese goods.

In a post on Truth Social, Trump's social media platform, he said the new round of tariffs would remain in place "until such time as Drugs, in particular, Fentanyl, and all Illegal Aliens stop this Invasion of our Country! [sic]"

Nothing More Than A Bargaining Tactic?

In the past, politicians have used the threat of tariffs as a negotiating tool with other countries. Trump's own pick for Treasury Secretary touted that tactic during the presidential campaign, saying it could be used to strike better trade deals.

That's led some economists to say Monday's announcement is likely a bargaining chip.

"Given the damage that such tariffs would inflict, particularly on Canada and Mexico given their close trade ties with the U.S., the announcement looks like a move to get action on border issues and then declare a policy win for the President, rather than as the first iteration of the administration's trade policy," wrote Avery Shenfeld, Chief Economist of CIBC World Markets.

What Would Tariffs Cost?

Economists have warned that tariffs will ultimately cost Americans, as retailers often pass on the increased import costs to consumers. Deutsche Bank economists predicted that inflation would be 3.7% in 2025 if the new tariff plan were implemented. That's up from their previous forecast of 2.6%.

The risk of increased prices is another reason economists think this newest trade proposal is never intended to be enacted.

"Trump, or at least someone with his ear, knows that his tax increases would be hugely unpopular, people are not anxious to pay higher prices for everything," wrote economist Dean Baker on social media platform X. "This means that Trump does not actually want his import taxes on goods from Canada and Mexico to take effect."

KPMG Chief Economist Diane Swonk said the tariffs could cost the U.S. economy, whether or not they are carried out.

"Threats alone escalate policy uncertainty, which acts as a tax on activity," she wrote on X.

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