Donald Trump, who pledged to make tariffs a centerpiece of his economic strategy during his re-election campaign, did not enact or modify any tariffs on his first day in the White House as expected. Instead, he outlined his priorities and plan to reshape global trade and directed federal agencies to pursue an "America-first" trade policy in a new executive order.

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President Trump signed the America First Trade Policy on Jan. 20, 2025, which aims to create a "robust and reinvigorated trade policy that promotes investment and productivity, enhances our Nation's industrial and technological advantages, defends our economy and national security, and—above all—benefits American workers, manufacturers, farmers, ranchers, entrepreneurs, and businesses." 

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The president says his proposals will bolster the U.S. economy by prioritizing domestic industries, which he expects to support job and business growth at home. Tariffs typically make imports more expensive, improving the competitiveness of domestic goods. Industries like steel, textiles and agriculture often see a boost in demand.

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Now, the U.S. may impose 25% tariffs on Canada and Mexico on Feb. 1, with other global economies potentially following next. While on the campaign trail, President Trump had previously threatened a 60% tariff on goods from China, 100% tariffs on Brazil, Russia, India, China and South Africa, and a so-called "universal" tariff of up to 20% on imports from all countries.‍

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What is a tariff?

Tariffs are a tax, duty or surcharge designed to make imported goods more expensive. The economic policy is intended to level the playing field for domestic producers or raise government revenue. For example, a 25% tariff on $1 billion worth of imports raises $250 million for the government.

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Historically, governments have used tariffs to protect industries like steel, aluminum and agriculture, which are integral to the economy because they create commodities necessary for other industries.

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But tariffs may also increase costs for businesses and consumers. During Trump's first term, tariffs on steel led to higher prices for U.S. manufacturers and consumers for some common household goods, such as appliances.‍

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How could Trump's new tariffs impact the economy?

Markets have already reacted to the potential for new tariffs. The Canadian dollar and Mexican peso have fallen in value, indicating investor concerns over trade disruptions.

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Industries with complex supply chains or extensive cross-border operations, such as automotive manufacturing, are bracing for higher costs and complexities. For example, a 25% tariff on auto parts from Mexico could raise production costs for American automakers and impact their global competitiveness.

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Generally, tariffs impact the supply chain in the following ways:

• Higher shipping costs as companies might choose to reroute to avoid tariffs
• Longer lead times, especially for industries reliant on imported raw materials
• Supply chain disruptions, with ports, warehouses and trucking companies requiring time to adjust their logistics and operations

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