Your Guacamole is about to Get More Expensive

 

It's February 2nd, 2025, the Wall Street futures market took a sharp downturn as investors are reacting to the White House’s fresh tariffs on Canada, Mexico, and China.  

This was expected because it was part of Trump's inauguration and campaign promises. That’s the thing with Trump. He's not your typical politician who likes to backtrack on their speeches. He tend to follow through with most of his campaign promises. So this was expected except most people didn't think he was going to make it would happen. 

Now these 25% tariffs on Canadian and Mexican imports, coupled with additional tariffs on Chinese goods, could significantly raise the cost of products Americans rely on daily. The markets responded last weekend swiftly to it, with analysts warning of a possible trade war in North America.  

Tariffs are essentially taxes on imported goods, and when imposed at such high levels, they tend to have direct consequences on prices for consumers. The U.S. economy is deeply and heavily connected to its trading partners, especially Canada and Mexico, and these tariffs could impact a wide range of industries, from agriculture to automotive manufacturing.  

Please consider these numbers:  

- The U.S. imports over $400 billion worth of goods from Canada annually, including oil, lumber, cement, and paper products.  

- Mexico supplies roughly 90% of the avocados and tomatoes consumed in the U.S., alongside a variety of other fresh produce. It's no surprise that the president of that country also threatened retaliation with tariffs over the weekend. 

- The automotive industry is highly integrated across North America, with parts and assembled vehicles moving between borders. Analysts estimate that these tariffs could increase the price of an average car by $3,000. Get ready. 

Additionally, since Canada is the largest supplier of foreign oil to the U.S., these tariffs could significantly impact gasoline prices. The U.S. imports four million barrels of oil per day from Canada, nearly four times the amount imported from OPEC nations. If tariffs are imposed on oil and gas, analysts predict that gasoline prices could rise by up to 50 cents per gallon, particularly in regions like the Midwest and the Rocky Mountains. Contrary to what people think, Canada and the U.S. need each other. 

The lack of clarity on exemptions is further fueling uncertainty. White House Press Secretary Caroline Levitt declined to provide specifics on whether oil and gas imports would be excluded. This uncertainty makes it difficult for businesses to plan, which in turn slows economic growth and increases consumer anxiety.  

But economists overwhelmingly agree on the impact of tariffs, 95% say that they will lead to higher prices for consumers. If these tariffs take full effect without exemptions, inflation could increase by 0.6 to 0.7 percentage points, pushing consumer prices higher across the board.  

Tariffs rarely go unanswered. That is why in response to the announcement, Canadian Prime Minister Justin Trudeau warned that Canada is prepared to retaliate immediately. If history is any indicator, this could lead to reciprocal tariffs that harm American farmers, manufacturers, and exporters, similar to what happened during President Trump’s first term when Chinese retaliatory tariffs hurt U.S. agriculture and industry.  

North American trade is deeply interconnected, with Canada, Mexico, and China accounting for 35% of all U.S. imports. If tariffs lead to further restrictions, consumers will feel the pinch in higher grocery bills, home construction costs, and retail prices. 

While inflation has cooled since its peak last year, it still remains above the Federal Reserve’s target of 2%. Housing costs and rising rents have played a key role in keeping inflation stubbornly high. Broad-based tariffs could exacerbate this issue, making groceries, cars, and gas even more expensive.  

At the end of the day, these economic shifts and tough talks among heads of states are felt most acutely by everyday people and Americans. Whether it's the price of gas at the pump, the cost of a new car, or the affordability of fresh produce, tariffs have a way of trickling down to consumers.  

So, as the White House finalizes this decision, one thing is clear, your guacamole is about to get more expensive. Buckle up.  

God bless us all.

I remain your pal, 

Ronnie Law