President Donald Trump has temporarily halted tariffs on imports from Canada and Mexico following last-minute agreements with the leaders of both countries. The decision has put a month-long pause on a potential trade war within North America.
The economies of the three nations are deeply interconnected, with an estimated $2 billion (£1.6 billion) worth of manufactured goods crossing their borders daily. Trump has argued that the tariffs are meant to protect American industries. However, many economists caution that such measures could lead to higher consumer prices in the U.S.
The reason behind this concern is that domestic companies importing goods are responsible for paying the tariffs. These businesses may either pass the additional costs onto customers directly or cut back on imports, which would result in a reduced supply of goods.
If the tariffs are eventually implemented, several essential products could see price increases.
Cars
The price of cars would likely rise by approximately $3,000, according to TD Economics. This is due to the complex nature of the North American auto industry, where car parts cross U.S., Canadian, and Mexican borders multiple times before final assembly.
Higher import taxes on these parts would inevitably raise manufacturing costs, leading automakers to transfer these expenses to consumers.
“Suffice it to say that disrupting these trends through tariffs… would come with significant costs,” said Andrew Foran, an economist at TD Economics. He also pointed out that “uninterrupted free trade” in the car-making sector had existed for decades, resulting in lower prices for consumers.
Beer, Tennessee Whiskey, and Tequila
Popular Mexican beer brands like Modelo and Corona could become more expensive in the U.S. if the companies importing them decide to pass on the increased import taxes. However, another possibility is that firms may simply import less beer rather than increase prices.
Modelo became the best-selling beer brand in the U.S. in 2023 and remains in that position for now.
When it comes to spirits, the situation is more complicated. The industry has largely operated without tariffs since the 1990s. In anticipation of the potential tariffs, trade bodies from the U.S., Canada, and Mexico issued a joint statement expressing their “deep concern.”
They pointed out that specific spirits, such as Bourbon, Tennessee whiskey, tequila, and Canadian whisky, are “recognized as distinctive products and can only be produced in their designated countries.”
Since the production of these beverages cannot simply be relocated, supplies could be affected, leading to higher prices. The trade groups also noted that many companies own various spirit brands across all three nations.
Houses
The U.S. housing market could also feel the impact, as tariffs on Canadian lumber imports would drive up construction costs. Trump has claimed that “the U.S. has more lumber than we ever use.”
However, the National Association of Home Builders (NAHB) has urged the president to exempt building materials from the proposed tariffs, citing concerns about housing affordability.
The industry body warned that lumber tariffs could raise the cost of building homes—most of which are primarily constructed from wood in the U.S.—and discourage developers from starting new projects.
“Consumers end up paying for the tariffs in the form of higher home prices,” the NAHB stated.
Maple Syrup
One of the most direct consequences of a U.S.-Canada trade war would be an increase in the price of Canadian maple syrup, according to Thomas Sampson, an associate professor of economics at the London School of Economics.
Canada’s maple syrup industry, worth billions of dollars, accounts for 75% of the world’s production. Around 90% of this comes from Quebec, home to the world’s only strategic maple syrup reserve, established 24 years ago.
“That maple syrup is going to become more expensive. And that’s a direct price increase that households will face,” Sampson explained.
He also noted that even U.S.-made products that rely on Canadian ingredients would see price hikes: “If I buy goods that are domestically produced in the U.S., but that are produced using inputs from Canada, the price of those goods is also going to go up.”
Fuel Prices
Canada is the largest foreign supplier of crude oil to the U.S. Between January and November of last year, 61% of America’s imported oil came from Canada, according to official trade figures.
Although Canadian goods imported into the U.S. are subject to a 25% tariff, crude oil has been given a lower 10% tariff.
While the U.S. has an ample supply of oil, its refineries are designed to process heavier crude oil, which mostly comes from Canada and, to a lesser extent, Mexico.
“Many refineries need heavier crude oil to maximize flexibility of gasoline, diesel, and jet fuel production,” stated the American Fuel and Petrochemical Manufacturers.
If Canada were to retaliate by reducing crude oil exports, fuel prices at the pump could rise for American consumers.
Avocados
One food item that could see a steep price increase is avocados. Nearly 90% of avocados consumed in the U.S. each year are grown in Mexico, where the climate is ideal for their production.
Should tariffs be enforced, the U.S. Agriculture Department has warned that avocado prices—along with those of avocado-based foods like guacamole—could spike, especially by Super Bowl Sunday on February 9.
Impact on Canadian Goods
Before Trump and Canadian Prime Minister Justin Trudeau reached their agreement to pause tariffs, Canada had been preparing to impose retaliatory import taxes.
An initial round of C$30 billion in tariffs was set to take effect on Tuesday, which would have resulted in higher prices for Canadian consumers as well.
The Canadian government had published a list of U.S. imports that would have faced immediate 25% tariffs. This included essential grocery items like oranges, a fruit that Canada struggles to produce due to its colder climate.
Alcohol imports from the U.S. would also have been affected. Several Canadian provinces—including Ontario, British Columbia, Manitoba, New Brunswick, and Nova Scotia—had planned to remove all American-made alcoholic beverages from store shelves starting Tuesday.
Any remaining U.S. alcohol available in Canada would likely have been subject to price increases, as it was included in the list of retaliatory tariffs.
Additionally, Canadian shoppers who purchase goods online from U.S. retailers could have felt the economic pinch due to a weaker Canadian dollar.
While the temporary halt on tariffs has provided short-term relief, the uncertainty surrounding North American trade continues, leaving businesses and consumers on both sides of the border bracing for potential economic shifts.