What new US-Canada tariffs could mean for your wallet

Welcome back here. It is 930 on the dot here on Good Day Chicago. So the U.S. and Canada at odds once again over tariffs, and it is raising new questions about what the trade fight could mean for really all of us businesses, workers, and you, the consumer. Our wallet. We're taking a deeper dive with Michael Negron, a Senior Fellow for Economic Opportunity at the Center for American Progress, also former Special Assistant to the President for Economic Policy. Michael, thank you for joining us. Can we start with the trying to break this down for our audience? I feel like we've been trying to follow this. Explain what's changed with the latest tariffs involving Canada. And also, why is this happening now? Yes. Good morning. Thanks for having me. So not only this is not only about Canada, this is about 60 other more than 60 other countries. So what essentially has happened? It's been a jam packed last few weeks is that the president's temporary tariffs imposed under what's called Section 122 of the Trade Act. He imposed these because the Supreme Court struck down that first big wave of Liberation Day tariffs that he imposed more than a year ago. He imposed those as a stopgap. There was a six month shot clock on those tariffs. And at the end of that six months, he needed to either let them go, put in an alternative, or ask the Congress to extend them. And his administration put in an alternative using a different authority on 60 countries, essentially claiming that these countries don't ban the use of forced labor. And that makes it an unfair practice. Separately, they impose these 50% tariffs on Canada using an authority that's never been used this way before. It's Section 338 of the Trade Act. And it's focused on automobiles, alcohol, dairy, and other similar products. So they did exempt energy, fertilizer, and critical minerals, among other things. Those don't take effect until August 19th. Most people think that's to allow for some negotiation for the president to try to get another trade deal done with Canada. But the bottom line for what this means for consumers is just the elevated prices that people have been paying due to tariffs. Because tariffs are just a tax that the government imposes on importing a product. And those taxes then get imposed upon consumers, they get passed through, that these tariffs will stay in place. So essentially, businesses are still paying 10% or more on the products they're importing, even higher when you're talking about those Canadian products. And that is getting passed along to consumers. So Michael, I wanna ask you about this because that's the way we have it explained when we talk about this, that this is eventually a tax and businesses pass this along to consumers and we all end up paying more. The president, for instance, is in Southeast Michigan today and he's going to be saying that the tariffs and the taxes and some of his economic policy has actually saved jobs in Michigan. So those two statements don't line up. What's the deal? I mean, what's going on here? Well, we have seen evidence that manufacturing in particular is doing better. It's generally down jobs since the president took office. There is a theory about tariffs that if you do them in a targeted way, you can protect industries from unfair foreign competition. One example of that is in electric vehicles. Over the last few years, the federal government has imposed pretty big, more than 100% tariffs on Chinese electric vehicles, which are super cheap compared to the rest of the world, and also charge very fast. And they did that to allow a US auto electric vehicle industry to emerge, and it has. It grew significantly over the course of this decade. But that's in a targeted way. What this administration has been doing from the beginning is just blanketing the world with these tariffs on all kinds of products, some of which are products we're never gonna create here. We had tariffs on bananas, on coffee, on cocoa beans that the president ultimately pulled back a few months ago because people were concerned about grocery prices. But we've had some tariffs here that just don't really make sense from a job protection perspective. They just seem to be ways of trying to get revenue from these governments or from businesses that are paying them. And what's happened is because of the refunds, we haven't actually been able to keep that revenue because the Supreme Court struck down the president's first round of tariffs. So can I follow up to this question? Because I'm also curious. I know that you mentioned these all take place at certain times. You mentioned August. So when these tariffs take effect, boom, they're in effect. At what point do I start feeling that as a consumer? How long does it take for me as a consumer to start paying more money? Do you have any idea of that, or is that just a random? No, it depends on when these products are hitting shelves. Now, in the case of these 10% tariffs that the president has extended through this, the ones that expired that he now extended through Section 301, businesses have already been paying 10% or more tariffs. And so I think what you're gonna see is no real change. People have already been paying elevated prices. At this point, we're more than a year into the president's tariff policies, and so pretty much the inventories of these stores are all reflecting those tariffs. I think in the case of the Canadian tariffs, that will take more time, and we'll see if they get negotiated down. But what you'll see is businesses have their existing inventories that they paid for. And if there was no tariff or a lower tariff in place when they acquired that product, they're very unlikely to pass anything through. It's when the inventory that they purchased, where they had to pay that heightened tariff, that's where they're faced with that question. Am I gonna pass some of this to the consumer? Am I gonna pass all of it to the consumer? Am I gonna try to save money in another way by reducing hours or doing something with costs or jobs? And so that's what the tariffs policy has done to thousands of businesses, both big and small, where they're paying these higher costs. And they're having to decide, am I gonna pass this all along, some of it, and it affects their bottom line. You know, Michael, we hear about these tariffs, I mean, for months and months, and it's not just the US, it's other countries too that coming back. I run into articles and they talk about trade discrimination. What are we facing here? Could some of these countries, including the US, be faced with accusations, real accusations of trade discrimination? Well, the United States is in a global trade regime where there are countries that do practices that are unfair to us. Whether it's the Chinese using lower cost labor, whether it's the Chinese dumping huge subsidies into their industries, overproducing products that their own consumers aren't buying. And so they dump them onto foreign markets like the United States, like Europe. That is a concerning practice, and it's one that's affected our strategic strength. We saw that during the pandemic, when there were types of products that we just couldn't produce here, semiconductor chips being the most prominent of them. We're very reliant on Taiwan for those. And so there is room for policy that tries to counteract those unfair practices. What the United States has done, though, under this administration, is it's imposed these tariffs in a blanket fashion. And on countries with sort of trumped up reasons, this forced labor argument that they announced on Friday is another example of it. And what will end up happening is, I think, two things. One, some countries may retaliate, and it could hurt US producers. We saw this with farmers who produce soy, in particular, with respect to our actions against China, where farmers were just not selling their product. China is the largest purchaser of US soy, and they just retaliated by stopping their purchases. And that was a real leverage point for the Chinese vis-a-vis the United States. But the other part is, as this administration keeps coming up with new reasons to put in place its tariffs, the Supreme Court strikes one down. Okay, here's another tariff. Coincidentally, it's the same number, but we have a different argument. The court may strike those down as well. And so what you see on the business side is a lot of uncertainty about whether these tariffs are permanent or not. If the Supreme Court strikes down these new tariffs, are there gonna be refunds for those? And so the bottom line there is just a lot of uncertainty, a lot of instability in the business climate. And that's not good for businesses, and it's not good for consumers. So many questions. A lot of layers to this. So many layers too, I know. I think a lot of us are wondering just how much more can we possibly spend? Michael, appreciate your insight this morning. Thank you. Thank you.