Following his election, President Donald Trump announced plans to impose tariffs on most U.S. imports, including a 25% tariff on products from Canada and Mexico. If the administration makes good on that threat, it would upend decades of North American Free Trade.
Morning host Luis Hernandez spoke about the implications of Trump’s plan with Nina Eichacker, Associate Professor of Economics at the University of Rhode Island.
Interview highlights
What is an import tariff?
Nina Eichacker: An import tariff is a tax assessed by a government on goods that are imported from other countries. The way that they work is that typically, a domestic import broker that works for businesses domestic to a given economy basically pays the customs when those goods are supposed to enter the country.
Typically, it’s not the foreign company that is exporting the good that pays it, but rather the import broker that works for a domestic importer, whether that’s Walmart or Costco or whoever. So tariffs are taxes that are assessed on different goods from different countries, and they can be implemented for any number of reasons.
On the impact the tariffs would have on Rhode Island residents
Eichacker: As those goods go through customs, the firm that is importing the goods – like, for example, Walmart – will subsequently pass that extra cost onto consumers. So domestic consumers are, by and large, the actors who pay the tariffs in practice.
On the impact the tariffs would have on Rhode Island businesses
Eichacker: These would likely have significant material impacts for businesses in Rhode Island. There are loads of enterprises in Rhode Island that rely on things like metal or things like produce or grain and other exports that come from Mexico and Canada.
So if your restaurant serves guacamole, you are likely to see higher prices on avocados or any other produce that may be coming from Mexico. If your ship-building enterprise uses steel that is coming from Mexico or Canada, you would see heightened costs.
These tariffs are likely to have a substantial impact for firms, and they’re also likely to have impacts for households. So if you buy produce at the grocery store that is exported from Mexico, whether those are limes or avocados or whatever, you as a consumer may also see rising prices as a consequence.
If other countries enact retaliatory tariffs, how would that impact Rhode Island?
Eichacker: Mexico and Canada are large importers of goods and services from the U.S. I think it’s very reasonable to think that they will enact retaliatory tariffs. That was a theme from the first Trump administration, that when the administration would implement tariffs, the countries that were on the receiving end of these tariffs would retaliate and implement complementary, or basically mirror tariffs, back on U.S. goods and services.
I think that it’s very likely that we will see similar impacts, and given that Rhode Island produces a lot of biomedical technology and so on, which is a prime import in both Canada and Mexico, I think it’s quite possible that Rhode Island businesses will see a negative impact from this.
