Tariffs on Canada, Mexico would deal blow to US economy: Report

Purdue University researchers warn that President Donald Trump’s proposed 25% tariff on imports from Canada and Mexico could lead to higher prices and a potential recession within the next three to five years. The impact would be particularly severe on North American manufacturing, as supply chains account for roughly half of trade between the three nations. Components of vehicles like the Chevrolet Silverado cross borders multiple times before final assembly, meaning the repeated imposition of tariffs would significantly drive up costs. For example, a $10,000 part undergoing work in Canada before returning to the U.S. could see its cost jump to $15,000 due to compounded tariffs, ultimately raising vehicle sticker prices. While some, like United Auto Workers Local 2209 chairman Rich LeTourneau, believe the tariffs might secure jobs in certain U.S. plants, the broader implications for General Motors and other manufacturers remain uncertain, writes the Journal Gazette.

Economic simulations by Purdue’s Center for Global Trade Analysis show that Trump’s tariffs would reduce U.S. GDP by about 0.25%, with losses potentially exceeding $75 billion if Canada and Mexico retaliate with their own 25% tariffs. Employment could drop by over 177,000 jobs from the tariffs alone and surpass 400,000 with retaliatory measures. Inflation is expected to rise by 1.3%, with a slightly lower increase if retaliation slows economic activity further. Beyond immediate financial impacts, these tariffs could erode global confidence in the U.S. as a trade partner, prompting other countries to explore alternative markets. If left in place, these tariffs risk not only harming economic growth and wages but also straining diplomatic relations and long-term trade stability across North America.