In just six weeks,Trump 2.0 has hit the ground running with a sweeping agenda aimed at restoring American prosperity. But in the rush to Make America Great Again (you've seen the hats), the Administration’s America First trade policy – tariffs first, questions later – seems unstoppable, even as the unintended consequences pile up. And the biggest casualty? American consumers.
Let’s first back up to recap what has happened overnight. Tariffs are coming – as expected – and Canada has hit back immediately, with a more comprehensive retaliatory tariff and non-tariff package to come. Markets are reacting predictably with the S&P 500 falling to its lowest level in nearly three months and the Dow Jones Industrial Average down nearly 650 points. All of this happened yesterday afternoon right after President Trump stated that tariffs of 25% on Canada and Mexico will begin today.
Make no mistake, tariffs are simply taxes that will raise prices for American consumers and businesses already struggling. What Trump should know is that Americans are hawks when it comes to high prices. U.S. economists credit consumer pushback against soaring costs with helping cool inflation after it hit 50-year highs in recent years. Major companies took notice too, adjusting prices as shoppers opted for cheaper alternatives and skipped purchases altogether.
Yet, here we are. Tariffs on Canadian goods will only drive up prices, making everyday items more expensive and U.S. exports less competitive. Even more concerning, inflation ticked up in January—3% year-over-year—while the cost of essentials like beef, bacon, and eggs surged even higher. (Egg prices, to be fair, are largely tied to an Avian flu outbreak, but that’s cold comfort at the checkout line.)
And it’s not just prices. The Department of Commerce reports that consumer spending—fueling two-thirds of U.S. economic activity—dropped in February for the first time in two years. Analysts expected a small increase. Instead, Americans tightened their wallets across the board—cutting back on cars, recreational goods, furniture, clothing, and even food and beverages.
Across-the-board tariffs will only squeeze consumers further, as businesses inevitably pass on higher costs. Sure, supply chains can shift over time, but in the short term, there’s no avoiding price hikes.
Trump is betting Americans will give him time to rewire the economy through tariffs. Maybe. But patience runs thin when housing, food, and daily essentials keep getting pricier. And U.S. businesses and exporters won’t tolerate massive supply chain disruptions for long.
During the election, President Trump promised that he’d bring the cost of living down “starting on Day One”, however, with inflation going up, consumers spending going down and the markets responding negatively to tariffs, higher prices is now a problem of the Administration’s own making.
A generation ago, “It’s the economy, stupid” helped Bill Clinton topple George H.W. Bush, despite the latter’s sky-high approval ratings. If Trump ignores the economic pain tariffs bring, history may serve up a lesson he won’t like.
Adam Taylor is a partner at NorthStar Public Affairs, where he advises companies and governments around the world on complex trade and economic issues. As a senior advisor on international trade in the Conservative government of Stephen Harper, Adam helped Canada expand its access to global markets through various free trade and trade-related negotiations.