The U.S. has entered a trade war. Donald Trump’s decision to impose 25% tariffs on goods from Mexico and Canada, as well as a 20% tariff on Chinese goods, could have wide-reaching and long-lasting impacts on the bottom line of millions of Americans. These follow reciprocal tariffs, where the U.S. matches the tariffs other countries charge for imported U.S. goods, imposed last month by the White House. (Canada and China have already retaliated with tariffs of their own.)
The duties hardly come as a surprise. Trump has been clear about his intention to slap tariffs on many countries since the campaign (though he did delay this round a month ago). He also utilized tariffs during his first term in the White House. Trump has claimed that tariffs have economic benefits for the U.S., though there is wide disagreement among economic experts about that theory.
The Tax Foundation estimates Trump’s tariffs will reduce after-tax incomes by 2.2%. For a household making $100,000, that’s $2,200. The Tax Policy Center is a bit less pessimistic, saying the tariffs will reduce after-tax incomes by 1%.
A November report from the National Retail Federation stated, “A growing body of economic research has attempted to assess the impacts of the proposed tariffs on the U.S. economy. In nearly every case, the conclusion has been the same: a net negative impact on the United States with results ranging up to $7,600 in additional costs annually per household.”
Some companies are already warning customers that they will be forced to raise prices, while others are insisting they won’t. That’s likely to be a continually evolving list. (Trump, for instance, has already threatened to increase the Canada tariffs after that country announced a retaliatory levy Tuesday—and has previously threatened the European Union with a 25% tariff).
The bottom line is this: Tariffs will impact your finances, possibly more than you might imagine. Here are a few ways they could force some belt tightening.
Groceries and household goods
The most immediate impact from the tariffs will likely be felt at the grocery store. Roughly half of the vegetables consumed in the U.S., as well as 40% of the fruits imported are from Mexico. And some 90% of all avocados consumed come from Mexico. Over the past two decades, the volume of fresh vegetables imported by the United States, primarily from Mexico and Canada, rose nearly 200%, according to a 2021 report by the U.S. Department of Agriculture.
The U.S. and Canada, meanwhile, have the largest two-way trade in live cattle and beef in the world. Price increases could come quickly on both sides of the border. Even French fries are likely to get more expensive. Canada sent some $1.7 billion worth of frozen fries and other “prepared potato” products to the U.S. in 2023. And tequila and beer drinkers are likely to pay more, also, as Mexico is the heart of the tequila business and Modelo is the top-selling beer brand in the U.S.
Exports of wood charcoal (and other wood products) from Canada to the U.S. in 2023 topped $11.5 billion, so summer barbecues will be doubly hit. And electronics, toys, clothing and sporting equipment are all markets that are heavily dependent on China, which has shown the ability to mass produce playthings that meet U.S. safety standards.
Retirement accounts
Since Trump confirmed he planned to impose tariffs on Canada and Mexico, the stock markets have been in a tailspin.
The Nasdaq and S&P 500 are now negative for the year and the Dow is barely clinging to positive territory (but is lower than where it stood when Trump was elected). Bitcoin is also lower since the start of 2025 (by almost 9%), despite the announcement of a national crypto reserve on Sunday.
Stock markets ebb and flow naturally over the course of time, of course. And retirement accounts are long-term savings vehicles. But for people who are drawing on them now or plan to soon, big drops in the market could have a direct impact on the money that they have available for their retirement.
Home and car prices
Canada is one of the leading suppliers of lumber to the U.S. (and lumber futures hit a 30-month high on news of the tariffs.) Meanwhile, China and Mexico make most of the drywall. And many auto manufacturers assemble vehicles sold in the U.S. in Mexico.
Car and truck prices could rise by as much as $12,000 by some estimates. And home builders might have to raise prices as well, which could impact not only the price of new construction, but existing homes on the market as well.
“Rising costs due to tariffs on imports will leave builders with few options,” said Danielle Hale, chief economist at Realtor.com, in a statement. “They can choose to pass higher costs along to consumers, which will mean higher home prices, or try to use less of these materials, which will mean smaller homes. … We may see buyer’s willingness to pay rise for existing homes as newly built homes get pricier which would mean rising prices for existing homes, too. “
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