WASHINGTON (NEXSTAR) — One of President-elect Donald Trump’s major campaign promises is instituting sweeping tariffs on the U.S.’s largest trading partners.
“I’m going to immediately impose a 25% tariff on everything they send into the United States of America,” President-Elect Trump said at a rally in November.
This is to fight illegal immigration and drug flow.
“25% on Mexico, 25% on Canada, and 10% additional on China,” Rodney Lake, George Washington University Investment Institute Director, said.
But why is President-elect Trump pushing for these tariffs and how do they work?
“If you’re producing cars in Mexico and you’re trying to encourage people to buy U.S. cars, how can I, as the government, raise the prices? Well, I can put a tariff on those goods,” Lake explained.
Lake says the goal is to bolster domestic industries in the U.S. But he warns, these tariffs will hit American’s wallets almost immediately.
“You can see these higher prices because it’s unlikely, for example, that these companies are going to take these big, you know, detriments to their bottom line, they’re going to pass that along,” Lake said.
These tariffs will impact the price of raw materials, like steel, plastic and crude oil from Canada, cars and car parts from Mexico, and electronics, like smartphones and computers, from China. Lake says the U.S. needs more time to build up its domestic production.
“You’re talking about years before you’re going to have a direct impact on the domestic production of those items,” Lake said.
However, Lake believes President-elect Trump may use this as a negotiating tactic to bring these countries to the table, to reach an agreement that will benefit all parties.