Business & Economy
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Business & Economy
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Trump's new tariffs could boost prices, derail stocks
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Many businesses and market forecasters have been warning that President Trump’s import taxes could translate into consumer price increases.
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Trump kicked off a trade war Tuesday, levying major tariffs on the top three U.S. trading partners — Canada, Mexico and China.
He imposed 25 percent import taxes on Canada and Mexico and increased tariffs on China from 10 percent to 20 percent.
Tariffs don’t translate directly into price increases, and businesses can respond to them in various ways, including just eating the cost increase; Trump’s 2018 tariffs did not cause a major spike in inflation in the way that the 2020 coronavirus pandemic did.
But disruptions resulting from companies altering their supply chains over highly integrated North American production pipelines could result in higher consumer prices.
“Tariff-induced disruptions risk exacerbating inflation, increasing the cost of essential goods, and placing financial strain on businesses and consumers alike,” the National Association of Wholesale Distributors, a trade group, warned in a Tuesday statement.
One estimate from the Anderson Economic Group found that the cost-per-vehicle for certain automobiles produced in North America could increase by $12,000 at the high end.
The Hill's Tobias Burns has five things to know here.
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Welcome to The Hill’s Business & Economy newsletter, I'm Aris Folley — covering the intersection of Wall Street and Pennsylvania Avenue.
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Key business and economic news with implications this week and beyond:
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Target and Best Buy warned on Tuesday that shoppers should expect to see higher prices on certain goods as President Trump’s tariffs on Mexico, Canada and China go into effect and those nations take retaliatory action.
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Liquor bottles are flying off the shelves in Canada, but not because they are being sold.
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Ontario Premier Doug Ford said he is hopeful the tariff fight between the U.S. and Canada will end within days.
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Commerce Secretary Howard Lutnick said President Trump may announce a compromise with Canada and Mexico on Wednesday, the day after he imposed 25 percent tariffs on the two neighboring countries.
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Welcome to Tax Watch, a new feature in The Hill's Business & Economy newsletter focused on the fight over tax reform and the push to extend the 2017 Trump tax cuts this year.
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Affordability issue rises in Trump tax policies
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President Trump campaigned on a pledge to lower costs for American families after the pandemic inflation increased the cost of living across the country.
But Trump’s new tariffs on Canada and Mexico, along with his domestic tax agenda to extend his 2017 tax cuts, could have an inflationary effect on the economy, with the effects concentrated on the poorest Americans.
“These tariffs are going to make life more expensive for families struggling to make ends meet and small businesses working to make payroll. They will increase the cost of daily expenses – like gas, groceries, and clothes,” Colin Seeberger, spokesperson for CAP Action, a left-leaning advocacy organization, said in a statement.
A 2024 study from the Brookings Institution found that income effects of the 2017 Trump tax cuts were overwhelmingly skewed to richer Americans.
“After-tax income rose by …$60 for those in the bottom quintile, $930 for the middle quintile, and $51,140 for the top 1 percent,” Brookings scholar William G. Gale and his co-authors found.
— Tobias Burns
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Upcoming news themes and events we're watching:
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President Trump on Tuesday will address a joint session of Congress at 9 p.m. EST.
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Branch out with more stories from the day:
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LITTLE ROCK, Ark. (AP) — The number of states imposing sales taxes on groceries has shrunk over the …
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Business and economic news we've flagged from other outlets:
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Dow tumbles again, loses more than 1,300 points in two days as Trump ignites trade war (CNBC)
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Kroger’s CEO abruptly resigns after probe into personal conduct (CNN)
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Trump Mulling Canada, Mexico Tariff Compromise, Lutnick Says (Bloomberg)
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Top stories on The Hill right now:
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The Ukrainian government has launched a T-shirt fundraising effort seeking to capitalize on Ukrainian President Volodymyr Zelensky’s now-infamous Oval Office meeting Friday with President Trump and Vice President Vance. Read more
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Donald Trump is a president at the height of his political power — and well aware of it. After a month spent disrupting federal agencies, laying off thousands of veterans and publicly humiliating Ukrainian President Volodymyr Zelensky in the Oval Office, Trump clearly feels untouchable. Read more
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Opinions related to business and economic issues submitted to The Hill:
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You're all caught up. See you tomorrow!
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