President-elect Donald Trump, an avowed fan of tariffs, is pledging to enact stiff import duties as soon as he’s inaugurated in January. For Trump, these new levies would both supercharge the trade policies pursued during his first administration and, more broadly, help the U.S. achieve key economic and social goals.
On his Truth Social site Monday evening, Trump unveiled plans to place a 25% tariff on all imports from Mexico and Canada on January 20, his inauguration day. The president-elect also said he intends to levy an additional 10% fee on all imports from China.
Trump’s penchant for protectionist trade policies is a source of concern for many economists and Wall Street analysts, who worry new tariffs and retaliatory measures by U.S. trade partners could slow economic growth, spur inflation and trigger a trade war.
But Trump and his allies, including his choice for Treasury Secretary, Scott Bessent, have argued that tariffs deployed during his first term didn’t boost inflation and that the upside could far outweigh any negatives.
“But tariffs are two things if you look at it,” Trump said in October in an interview with Bloomberg News editor-in-chief John Micklethwait. “No. 1 is for protection of the companies that we have here, and the new companies that will move in because we’re going to have thousands of companies coming into this country.”
Here are four ways Trump says tariffs will help with the U.S., along with what experts say.
Trump believes that imposing tariffs on trading partners will help protect U.S. businesses at a time when domestic manufacturing jobs have fallen far from their peak in 1979.
In some instances, the tariffs that Trump imposed in 2018-19 achieved that goal, with the Brookings Institution noting there’s some evidence that jobs in specific industries may have received a boost. For instance, tariffs on imported washing machines may have created 1,800 new U.S. jobs at Whirlpool and other manufacturers, according to the centrist think tank.
But that ignores the broader impact of Trump’s first-term tariffs on U.S. manufacturing, with the Federal Reserve finding that U.S. manufacturers ended up facing higher costs for raw materials they imported, as well as from retaliatory tariffs from other nations. The number of U.S. manufacturing jobs fell slightly during Trump’s first term, from about 12.4 million to 12.2 million workers, although a range of factors could account for that decline.
“[O]ur results suggest that the tariffs have not boosted manufacturing employment or output, even as they increased producer prices,” the Fed researchers noted.
Trump also contends that broad-based tariffs will convince some foreign manufacturers to open plants in the U.S. as a way to avoid the import duties.
“The higher the tariff, the more likely it is that the company will come into the United States and build a factory in the United States, so it doesn’t have to pay the tariff,” Trump told Bloomberg’s Micklethwait.
Although such a shift is possible, Micklethwait said such changes would “take many, many years.” (Trump disputed that, saying companies would “come right away.”) Experts note that many factors beyond tariffs affect where companies decide to operate, including supply chains, taxes, shipping costs, and labor and regulatory policies.
Already, some businesses are anticipating the impact of tariffs by shifting their manufacturing locations, but that may not be guaranteed to benefit the U.S. For instance, shoemaker Steve Madden said if Trump places new tariffs on Chinese imports, it will shift manufacturing away from China and toward nations such as Cambodia and Vietnam.
Trump has also touted tariffs as a way to generate new federal revenue that can offset his proposed tax cuts. During his first administration, his tariffs — more limited than his current proposals — generated $80 billion in revenue, according to the Tax Foundation.
If Trump institutes a 10% tariff on all imports, as he proposed during his campaign, the federal government would reap $2 trillion from 2025 through 2034, estimates the nonpartisan Tax Foundation, a think tank focused on tax issues.
According to Goldman Sachs, a 25% tariff on Canada and Mexico, along with a 10% tax on Chinese imports, would generate just under $300 billion in tariff revenue per year. Overall, 43% of U.S. imports come from Mexico (15.4%), Canada (13.6%),and China (13.9%).
However, that revenue would largely be paid by U.S. consumers and businesses, experts say. That’s because tariffs are not paid by the countries that export to the U.S., as Trump maintains, but rather by U.S. importers.
In other words, companies like Walmart would be faced with the decision of whether to swallow the higher costs of imports, or passing those on to consumers, Vicky Redwood, senior economic adviser for Capital Economics, wrote in a research note.
“If the costs are passed on, then customers face a choice: continue buying the (now more expensive) import or switch to buying a domestic alternative (which will cost more than the import pre-tariff),” she noted.
Trump’s tariffs could cost the typical U.S. family an additional $2,600 a year due to importers and manufacturers passing the cost of tariffs to consumers, according to an August analysis from the Peterson Institute for International Economics, a nonpartisan think tank focused on economic issues.
Trump also sees the threat of new tariffs as a way to curb illegal immigration and drug smuggling, citing people “pouring through Mexico and Canada, bringing Crime and Drugs at levels never seen before.” The tariffs would remain “until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop this Invasion of our Country!” he added.
Much of the fentanyl within the U.S. is smuggled from Mexico. During President Biden’s term, border seizures of the drug rose sharply, with U.S. officials tallying about 21,900 pounds (12,247 kilograms) of fentanyl seized in the 2024 government budget year, versus 2,545 pounds (1,154 kilograms) in 2019, when Trump was president.
While it’s possible that Canada, Mexico and China could increase enforcement against drug smuggling or immigration to avoid Trump’s tariffs, it’s unclear whether such a threat along would achieve those goals. Mexican President Claudia Sheinbaum on Tuesday suggested Mexico could retaliate with tariffs of its own and described illegal drugs as a U.S. problem, while indicating a willingness to discuss the issues with Trump.
The flow of drugs into the U.S. “is a problem of public health and consumption in your country’s society,” she said.
