Thanksgiving Worries Amid Trump's New Proposed Trade Policies
As Americans sat down for Thanksgiving this year, many enjoyed a financial reprieve with holiday meal costs at their lowest in years. Yet, the looming policy shifts under the incoming Trump administration cast a shadow over these celebrations. With new tariffs targeting imports from Mexico, Canada, and China and a mass deportation agenda, the holiday table could become significantly more expensive in the coming years. These actions risk disrupting supply chains, driving up food and energy prices, and destabilizing key sectors like agriculture and manufacturing. The ripple effects will likely be felt by consumers, businesses, and workers alike.
The Return of Tariffs and Trade Disruptions
President-elect Donald Trump has announced sweeping tariffs that would impose a 25% duty on all imports from Mexico and Canada and an additional 10% tariff on Chinese goods. Framed as measures to address border security and fentanyl trafficking, these tariffs sidestep Congressional approval, citing national security provisions. However, their unilateral implementation raises significant questions about compliance with the United States-Mexico-Canada Agreement (USMCA), which mandates consultation among member nations before imposing trade barriers.
The economic stakes are high. Mexico and Canada are expected to retaliate by targeting key U.S. exports, particularly in the agriculture, manufacturing, and energy sectors. For instance, U.S. crude oil exports to Canada—valued at over $20 billion annually—could face punitive tariffs that disrupt trade and increase domestic energy costs. Similarly, Mexico, which has previously targeted pork, cheese, and whiskey in retaliation, may renew these efforts, further straining U.S. industries. Analysts estimate these retaliatory tariffs could cost U.S. exporters over $12 billion annually, with states like California, Texas, and Michigan bearing the brunt of the impact.
Agriculture Faces New Pressures
The agricultural sector, particularly in California, stands to lose significantly. California is a leading exporter of almonds, wine, and citrus, and retaliatory tariffs of up to 20% on these products could severely undercut their competitiveness in global markets. With the state’s agriculture industry already grappling with inflation and supply chain challenges, the projected losses—exceeding $5 billion annually—could devastate farmers and processors alike.
The effects are reminiscent of the 2018 trade war, where Trump’s tariffs on steel and aluminum triggered retaliatory measures from trading partners. According to the USDA’s Economic Research Service, these tariffs led to a $27 billion decline in U.S. agricultural exports between mid-2018 and the end of 2019. States in the Midwest, such as Iowa, Illinois, and Kansas, bore the brunt of these losses, with soybeans, corn, and pork among the hardest-hit products.
Immigration Crackdowns and Workforce Shortages
Trump’s immigration policies add another layer of complexity. The administration plans mass deportations targeting undocumented workers, including the estimated 1.7 million immigrants employed in the U.S. food supply chain. This move could leave farms and food processing facilities critically understaffed, leading to unharvested crops, higher production costs, and potential food shortages. In states like California and Texas, where agriculture heavily depends on immigrant labor, these measures could have devastating economic consequences.
Similar scenarios have played out before. In 2011, Alabama’s stringent immigration laws left produce rotting in fields as farmers struggled to find replacement workers. Experts warn that a repeat of this labor crisis could exacerbate supply chain disruptions and further increase food prices, impacting families across the country.
Impact on the Energy Sector
The oil and gas sector is also at risk. Canada, a top importer of U.S. crude oil, may impose retaliatory tariffs on energy products, threatening cross-border pipeline projects like Enbridge’s Mainline system and the Keystone pipelines. These disruptions could increase domestic energy prices while encouraging Canada to diversify its energy sources, resulting in billions of dollars in losses for the U.S. energy sector.
The potential tariffs echo the economic fallout from Trump’s first term, when tariffs on steel and aluminum led to increased costs for manufacturers and consumers alike. Now, with the energy sector’s reliance on cross-border trade, the stakes are even higher. U.S. crude oil exports to Canada exceeded 400,000 barrels per day in 2023, valued at over $20 billion annually. Tariffs on these exports could not only raise costs for consumers but also weaken the U.S.’s competitive edge in global energy markets.
USMCA Implications and Congressional Scrutiny
Trump’s proposed tariffs may violate core provisions of the USMCA, which was designed to foster predictable and collaborative trade relations among the U.S., Mexico, and Canada. Unilateral tariff actions undermine these principles and risk destabilizing the trade agreement. Lawmakers from both parties have already expressed concerns, with Congress expected to closely scrutinize these measures. Legal challenges from industry groups and trade associations are also likely to follow, further complicating the administration’s plans.
If you have questions about how these tariff changes could impact your operations or require tailored solutions to navigate these challenges, please contact us. We are here to provide strategic advice and actionable insights to help you adapt effectively