Graphic: U.S. tariffs could accelerate inflation, slow growth

The Trump administration announced in early February that it would impose 25% tariffs on Canadian and Mexican imports (but cut that percentage to 10% on energy imported from Canada), and a 10% tariff on goods shipped from China. Although the administration delayed duties on Canadian and Mexican goods until March 4, it kept them on China’s imports. That prompted the three countries to threaten retaliatory tariffs. It’s an ever-changing situation, but many economists expect the tariffs will have inflationary effects and potentially slow economic growth.

Trade categories: The U.S. imported goods valued at $3.27 trillion in 2024 and exports totaled $2.07 trillion, according to data compiled by the U.S. Census Bureau. Capital goods were the largest category of imports, accounting for 29.5%, followed by consumer goods (24.7%) and industrial supplies and materials (20.7%).

Big three trading partners: Mexico, Canada, and China are the U.S.’ largest trading partners. Last year, the three nations represented 41.5% of imports and 40% of exports. The U.S.' 15-largest trading partners accounted for 77.2% of imports and 70.5% of exports.

Economic uncertainty ahead: It's difficult to ascertain the economic fallout from U.S. tariffs. However, inflation remains stubbornly high. New tariffs could accelerate price increases as companies pass along their higher costs, to the extent that they can. The core personal consumption expenditures price index, the Federal Reserve’s preferred inflation gauge, rose 2.8% last year, above the central bank’s 2% long-term target. Two economists at the Boston Fed projected the tariffs on Canada, Mexico, and China could add 50- to 80-basis points to the core PCE price index, although a time frame wasn't provided.