Jason Reed, University of Notre Dame

If U.S. voters reelected Donald Trump hoping for relief from higher prices, his recent threats to impose tariffs on America’s three largest trade partners might make them think again.

On Saturday, Feb. 1, Trump announced 25% tariffs on Canada and Mexico and 10% tariffs on China, which he said would take effect on Tuesday, Feb. 4. While markets braced for the news to some degree, they still saw a steep premarket sell-off on Monday, Feb. 3, followed by morning volatility.

While Canada and Mexico negotiated monthlong reprieves on Monday, the new tariffs on China went into effect as expected Tuesday, Feb. 4. And while the ultimate shape of Trump’s tariff policy remains to be seen, the president warned that American consumers could feel “some pain” as a result.

Given my training as an economist and finance professor, I think Trump could be right on that score. In fact, if the tariffs go into effect, they could spell disaster for the Federal Reserve’s inflation reduction efforts.

From grocery stores to homes

U.S. consumers might be surprised to find out that almost every economic sector could be affected by this opening salvo of tariffs, should they go ahead in March. Imports from Mexico and Canada reached close to US$1 trillion in 2024, almost double the amount the U.S. imports from China.

The U.S. is particularly reliant on Mexico for fresh fruits and vegetables, and on Canada for lumber. So if the tariffs go into effect, Americans who have been waiting for home prices to ease may have to continue waiting, as tariffs on lumber and other building materials could worsen the affordable-housing crunch. And let’s not even talk about avocado prices.

Meanwhile, the 10% tariffs on Chinese goods will likely boost the price of electronics, and China has already imposed retaliatory measures. Trump has also proposed 25% tariffs on Taiwan and its semiconductor industry, in an attempt to push Taiwanese companies to invest more in U.S. manufacturing. If that tariff were to go into effect, prices for U.S. consumers would be even higher.

A tax by any other name …

Tariffs are an import tax. They’re passed through the supply chain in the form of higher prices and are eventually paid by consumers. Traditionally, governments have used tariffs as a fiscal tool to encourage businesses and consumers to move away from foreign-made products and support domestic businesses instead.

In theory, new tariffs could encourage foreign businesses to invest in the U.S. and make more stuff on American soil. Unfortunately, domestic manufacturing has seen a systemic decline since the 1980s, resulting in lower prices for consumers but severely limiting U.S.-produced products. In the short term, at least, import taxes on Canadian, Mexican and Chinese products would ultimately be paid by U.S. consumers.

Although this round of tariff threats may seem arbitrary to some, the Trump administration says it considers tariffs deeply intertwined with national security concerns. Stephen Miran, Trump’s pick to chair the president’s Council of Economic Advisers, has laid out a path for Trump’s tariff plan, which he says is aimed at putting American industry on fairer ground against the rest of the world.

In the long term, it’s unclear whether Trump’s threatened trade war will bring domestic manufacturing back to the U.S. and start a new industrial renaissance. In the meantime, American consumers will likely be stuck holding the bag.

Jason Reed, Associate Teaching Professor of Finance, University of Notre Dame

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Bedassa Tadesse, University of Minnesota Duluth

On Saturday, Feb. 1, 2025, U.S. President Donald Trump announced a plan to slap steep tariffs on imports from key American trading partners – 25% on goods from Mexico and Canada and 10% on imports from China. His stated reason? To curb illegal immigration and drug trafficking.

Both Mexico and Canada managed to buy some time. After urgent phone calls with Trump on Feb. 3, their leaders each secured a one-month reprieve. But Mexico’s Claudia Sheinbaum and Canada’s Justin Trudeau also made it clear to their U.S. counterpart: If these tariffs go through, they’ll hit back with their own trade restrictions. The world is watching the opening moves of what could become another costly trade war.

As a professor of economics, I can explain why this poses significant risks to the U.S. economy and American consumers. Economic theory suggests that tariffs distort market efficiency, raising production costs while limiting consumer choice and increasing prices.

Who really pays for tariffs?

While politicians often frame tariffs as a way to punish other countries, they actually hit domestic consumers and businesses hardest. Whether they’re facing higher grocery bills or disruptions in manufacturing, Americans will feel the strain.

When tariffs are imposed, companies must either absorb the additional costs – cutting into profits and potentially threatening jobs – or pass these costs to consumers through higher prices. Small businesses operating on thin profit margins are particularly vulnerable, as many lack the resources to quickly switch suppliers.

Tariffs trigger costly retaliation

Worse yet, such measures commonly set off a cycle of retaliation. During past trade disputes involving the U.S., affected nations have responded with counter-tariffs on American products, including textiles, steel and agricultural goods. Such retaliatory efforts have led to sharp declines in U.S. exports.

During the first Trump administration, for example, China imposed retaliatory tariffs on U.S. agricultural exports. As a result, the U.S. farmers lost billions of dollars, and the U.S. spent billions in government aid to offset those losses. China has already issued new tariffs on imports of U.S. goods and export controls on some of its exports to the U.S. to retaliate for Trump’s current move.

History also shows that trade wars are self-defeating. The Smoot-Hawley Tariff Act of 1930, which imposed tariffs on over 20,000 imported goods, prompted swift retaliation from trading partners and contributed to deepening the Great Depression.

Modern trade wars have other consequences

Modern trade wars hit closer to home than most Americans realize. The recent tariff threat against Colombia reveals why. In 2023, Colombian farmers supplied US$1.14 billion worth of fresh-cut flowers to U.S. florists. In a near-crisis that lasted a weekend, Trump threatened to slap steep tariffs on the South American nation, right when flower shops across America were stocking up for one of their busiest seasons: Valentine’s Day.

The same tariffs would have hit Colombian coffee too, affecting everything from neighborhood cafes to grocery store prices. This shows how modern trade disputes can instantly disrupt the everyday purchases Americans make.

Other key trading partners, including the European Union, have also come into the crosshairs. On Jan. 30, 2025, the president issued a stark warning to Brazil, Russia, India, China and South Africa – the so-called BRICS nations – threatening 100% tariffs if they continued efforts to reduce reliance on the U.S. dollar as their reserve currency.

These threats can do more than alienate strategic partners; they risk accelerating dedollarization – pushing nations to develop alternative financial systems that weaken U.S. influence in global trade.

A more effective approach

Beyond causing immediate economic pain, constant tariff threats risk damaging America’s credibility as a reliable trading partner. The U.S. helped establish the rules-based international trading system, but regular tariff threats erode global trust and push trading partners to seek alternatives to the U.S. market.

The reality is clear: No country in the modern era has successfully used tariffs to grow its economy or improve the well-being of its people. The countries that are most dependent on tariff revenues for their national budgets are among the world’s poorest and least developed economies.

I believe the path to maintaining America’s economic leadership lies in embracing a smarter, more strategic trade policy – one that builds alliances instead of breaking them. A strategy that prioritizes negotiation, fosters innovation and enhances competitiveness – and that doesn’t rely on protectionist tactics more often used by developing nations – would strengthen cooperation and stability, ensuring long-term economic prosperity.

Bedassa Tadesse, Professor of Economics, University of Minnesota Duluth

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Jennifer Van Hook, Penn State

Undocumented immigration is a key issue in American politics, but it can be hard to nail down the basic facts about who these immigrants are, where they live and how their numbers have changed in the past few decades.

I study the demographics of the U.S. immigrant population and have seen how the data has changed over time. Here are some basics to set the stage as President Donald Trump begins his second term in office vowing to crack down hard on immigrants, including by conducting mass deportations.

Immigration status

My analysis of the Census Bureau’s 2023 American Community Survey data, in collaboration with the Migration Policy Institute, a nonpartisan nonprofit immigration research group, finds that as of the middle of 2023, approximately 51 million foreign-born people lived in the United States.

Most immigrants are in the U.S. legally. About 49% have become U.S. citizens by a process known as naturalization. Another 19% hold lawful permanent resident status and are eligible to become U.S. citizens through naturalization. Still another 5% are in the country on temporary visas, like those for international students, diplomats and their families, and seasonal or temporary workers.

The remaining 27% – around 13.7 million people – are outside those categories and therefore generally considered to be undocumented.

My analysis shows that the number of undocumented immigrants held steady at around 11 million between 2007 and 2019. In the next four years, the numbers increased by nearly 3 million. This recent growth is mostly attributable to large increases in border crossings by migrants from Central and South America who were seeking asylum or other forms of humanitarian relief. Starting in June 2024, however, the number of people entering across the U.S.-Mexico border fell back to normal levels when the Biden administration implemented the Secure the Border rule, which suspends asylum applications at the border when crossings reach a seven-day average of 2,500.

These changes were accompanied by changes in the undocumented migration process itself. In the past, undocumented immigrants often entered the country by slipping undetected across the U.S. border with Mexico. But increased border enforcement made the journey more dangerous and expensive.

Instead of paying smugglers or risking their lives in the desert, growing numbers of undocumented immigrants now either directly approach immigration officials at airports or land-border crossings and seek asylum in the U.S. Others are initially admitted to the country legally on a temporary tourist, student or work visa – but then overstay the time period for which they have permission.

Additionally, growing numbers of undocumented immigrants occupy what might be called a “liminal” or “in-between” status. The Migration Policy Institute analysis estimates this encompasses a range of groups as of the middle of 2023, including:

• About 2.1 million people awaiting a decision on their asylum claims.
• 521,000 parolees, allowed into the U.S. for humanitarian or national security reasons, like those paroled recently from Afghanistan and Ukraine.
• 654,000 people who hold temporary protected status because it would be unsafe for them to return home due to armed conflict, natural disasters and other emergencies.
• 562,000 who are protected by the Deferred Action for Childhood Arrivals program because they were brought to the United States as children by their parents.

The report estimates that just over one-quarter of undocumented immigrants currently occupy this type of “in-between” status. These immigrants are protected from deportation. Some even have a legal right to work in the U.S. Yet they do not possess a durable legal immigration status, and their rights could be threatened by policy changes.

While Trump says he wants to deport as many as 11 million immigrants, analyses published by The New York Times and The Washington Post indicate that it may be difficult to remove many of them under existing U.S. law. The one group that is easy to remove – those with a criminal record – is relatively small, numbering about 650,000.

Shifting countries of origin

Since 1980, Mexicans have been the largest single national origin group in the United States. I found that 10.9 million Mexican-born individuals were living in the country in 2023, making up 23% of all immigrants. The second-largest group, immigrants from India, numbered just 2.9 million, or 6% of all immigrants living in the U.S.

However, immigrants’ origins have been shifting away from Mexico.

With the onset of the Great Recession of 2007-2009, work opportunities in U.S. construction and manufacturing evaporated. Many Mexican laborers had been working in construction at the time but went back to Mexico when the U.S. housing market collapsed.

At that same time, Mexico’s economic conditions improved, its population growth slowed, and many would-be migrants opted to stay home. For the first time in decades, from 2007 to 2022 the number of Mexicans who returned home exceeded the number coming to the United States.

This trend was especially pronounced among undocumented immigrants. I found that Mexicans made up about 51% of the undocumented immigrants who arrived in the country 10 or more years ago. Central Americans made up 20%, and the remaining originated from other regions.

However, undocumented migrants now come from across the globe. Among undocumented immigrants who arrived within the past 10 years, 19% came from Mexico. Larger shares came from Central America and South America. While some of these new migrants seek work, others flee crime, economic and ecological disasters, and political persecution in their home countries.

Duration of residence

Most immigrants, whether they are in the U.S. legally or illegally, have lived in the United States for many years. Just under half of foreign-born individuals have lived in the country for two decades or more, and more than two-thirds have lived in the country for at least 10 years. Only 20% arrived within the past five years.

This is a dramatic change from the early 2000s, when less than 10% of immigrants had been in the U.S. for more than two decades, and more than one-third had arrived within the previous five years.

That means many of the people who are likely to be targeted for deportation in the coming months are settled, long-term members of American society.

Place of residence

As of 2023, 6.6 million immigrants reported on the Census Bureau’s American Community Survey that they moved to the United States in the past five years.

However, the effects of these new immigrants on American communities has been uneven. Although most communities are more racially and ethnically diverse now than in the past, the numbers of newly arrived immigrants are relatively low in most places.

Fifteen states host fewer than 20,000 immigrants, and 33 states are home to fewer than 100,000. In contrast, over half of new arrivals live in just five states: California, Florida, Illinois, New York and Texas are the home of over half of new arrivals yet have only 37% of the U.S. population. Other states such as Georgia, Michigan, New Jersey, North Carolina, Pennsylvania and Washington also are home to large and growing immigrant populations.

The U.S. immigrant population is changing rapidly. In the early years of the 21st century, Mexican immigrants dominated undocumented immigration flows to the United States. Decades later, many of these people continue to live in the country.

In the past four years, however, the flow of undocumented people increased dramatically. These new arrivals tend to come from troubled nations in Central and South America, many of whom are protected from deportation and have a legal right to work in the U.S. Altogether, most undocumented immigrants either have lived in the country for decades or have legal protections.

Neither of these groups fit the profile of undocumented immigrants who are typically targeted for deportation.

Jennifer Van Hook, Distinguished Professor of Sociology and Demography, Penn State

This article is republished from The Conversation under a Creative Commons license. Read the original article.