The Effects of Trump's Tariffs

INDIANAPOLIS — President-elect Donald Trump has announced plans to impose tariffs on imports from Mexico, Canada, and China upon taking office. While these tariffs target other nations, economic experts warn that they could ultimately cost Americans money and jobs.

“The US economy will suffer greatly,” stated Gary Lemon, an economics professor at DePauw University.

A tariff is essentially a tax levied on imported goods. Anything produced outside of the United States would face this tax, with Trump proposing a 25% tariff on goods from Mexico and Canada, along with an additional 10% tax on those from China. Trump argues that these measures are necessary due to weakened borders that facilitate illegal immigration and drug trafficking.

“So, we’ll be in a war,” Lemon explained. “Not a shooting war, but an economic war where everyone will be a loser.”

Kyle Anderson, a clinical assistant professor of business economics at the Indiana University Kelley School of Business, added: “If the tariffs he’s proposing actually come to fruition, it will definitely lead to higher prices. Producers will have to pass those costs along in the form of increased prices.”

Lemon predicts inflation could rise by as much as 2%. “We get a lot of our oil from Canada, and if we put a 25% tariff on it, I’ve seen estimates suggesting gas prices could increase by 50-75 cents,” he noted.

While some experts believe that strategically applied tariffs can be beneficial—potentially protecting certain industries or technologies—widespread tariffs raise concerns. Anderson remarked: “There are strategic reasons why we might invest in certain technology. Tariffs can protect those industries; however, they become potentially harmful when applied across the board.”

Trump's proposal for blanket tariffs affects various sectors including raw materials like oil and lumber sourced from Canada. Anderson observed: “The price of lumber would rise significantly now. If homes or apartments are under construction, everything becomes more expensive and may deter potential home buyers and impact jobs in the construction industry.”

Both experts anticipate retaliatory measures as well. For instance, Mexican President Claudia Sheinbaum Pardo has suggested imposing tariffs on US goods—a move that could adversely affect American jobs and businesses.

In Indiana specifically, this could harm exports such as pharmaceutical drugs and corn. “Consider an Indiana corn farmer who sells corn to Mexico,” Lemon explained. “With tariffs in place, his corn may become too expensive for Mexico to import.”

Lemon cautioned further: “Prices will go up. Some companies unable to raise prices may go bankrupt, leading to job losses.”

Indiana Governor Eric Holcomb expressed some indifference towards the situation when he said: “With everything there’s of course rhetoric; there’s messaging being sent. But until we see actual details on how this will play out, I’m not overly concerned.”

Experts speculate that these announcements may simply serve as leverage for negotiations. Following the tariff announcement, both Sheinbaum and Trump reported having had productive discussions on Wednesday, although specifics regarding the tariffs were not addressed.