Associated Press Economics Writer Paul Wiseman
Minnesota farmers are worried about the price of fertilizer. San Diego entrepreneurs deal with the unexpected increase in restaurant remodeling. Midwest sheet metal manufacturers lament the prospect of rising aluminum prices.
Businesses knew that Trump’s import tax (duty) on America’s biggest trading partners was due to come into effect Tuesday. But many of them thought they would get a reprieve. After all, the unpredictable president had delayed tariffs in Canada and Mexico for 30 days before it began on February 4th.
This time there’s no such luck.
Late on Tuesday, the US imposed a 25% tariff on goods from Canada and Mexico, launching a trade war with its closest neighbors and allies. Trump has also doubled the 10% tax on Chinese imports in a series of moves that have raised tariffs to the highest level since the 1940s. Canada’s energy was shown to be mercy and received a low 10% tax.
The three countries promptly announced their own retaliatory tariffs.
Commerce Secretary Howard Lutnick said later Tuesday that the US is likely to meet “the middle” in Canada and Mexico. Lutnick told Fox Business News that tariffs will not be suspended, but Trump will reach a compromise.
The longer the tariffs, the more damages can be incurred, forcing businesses to decide whether to eat higher costs and pass them on to consumers who have withstanded inflation. If tariffs and retaliation continue for a year, national estimates of economist Kathy Boszjänschick says that US economic growth is 1 percentage point lower and inflation is 0.6 percentage point higher otherwise.
Manuel Sotero, who runs the Mexican truck fleet that transports goods across the US southern border, had no idea Trump would dice in US trade worth $2.2 trillion with Mexico, Canada and China. In fact, Mexico has already taken steps to address the ostensible complaints behind Trump’s Tuesday’s tariffs (the flow of illegal drugs and immigration).
“I really thought Trump would have reversed the course yesterday afternoon or last night,” Sotero, who holds Trump’s bobblehead behind his desk, said Tuesday.
But the president is pushing for tariffs and now businesses are in a hurry to deal with them.
David Spata Fore, who owns several restaurants in San Diego, said his business was already stumped by the surge in prices for eggs and dairy products last month. Tuesday’s tariffs are just the latest blow.
“It all affects everything,” Spatafore said.
One of his restaurants is in the midst of an increasingly expensive remodel as Canada’s timber and steel tariffs hit.
“We were in the middle of a quote that a custom oven was being made,” he said when the contractor added the tariff charge to his estimate. The thin margins in the restaurant industry mean that eating higher costs is difficult.
“Where are you supposed to absorb that?” he said.
Mission Produce in Oxnard, California packs avocados and mangoes and distributes them to supermarkets and restaurants around the world. Co-founder and CEO Steve Bernard doesn’t need to raise prices anytime soon. Mission Produce still has the inventory of Mexican avocados and other aging of other produce in US warehouses.
But “if this lasts more than 10 days, our costs will vary significantly,” he said. “We need to come to the table and understand something.”
Bernard expects large retailers to resist price increases, but smaller, independent chains may need to raise prices faster as they have fewer stocks on hand.
“My company will immediately feel harmful effects as a result of these tariffs,” says Traci Tapani, sisters and co-president of Wyoming Machine, a sheet metal manufacturer in Stacey, Minnesota, which relies on aluminum in Canada. Tapani is the vice-chairman of the US Chamber of Commerce and Industry’s Small Business Council. “The threats and uncertainties have made business decisions difficult. These types of tariffs make it extremely difficult for small businesses like me to grow.”
At Cannon Falls in Minneapolis, about 45 miles (72 kilometres) south of Minneapolis, farmer Danny Landell is particularly concerned that Trump’s import tax will raise the prices of mustard fertilizer in Canada.
“To grow healthier crops, you need potash,” he said. “And it doesn’t matter if you’re big, medium or small, that’s going to affect you.”
Minnesota Democratic Gov. Tim Waltz visited Randell’s farm on Tuesday to criticize Trump for risking ties with the state’s biggest trading partner.
The outcome of Trump’s trade war is not just higher costs. There is also uncertainty as the president threatens and actually imposes import taxes.
“Things are unfolding very quickly,” Brian Cornell, CEO of discount retailer Target, told reporters Tuesday. “We look carefully and understand this. Are these long-term tariffs? Is this a short-term action? How will this unfold over time? I think we’re all guessing.”
Uncertainty can be at the expense of companies delaying plans to make investments and delaying plans to sign up with new suppliers until they know which countries and which products could become tariff targets.
During Trump’s first trade war, US business investments weakened in late 2019, prompting the Federal Reserve to cut benchmark interest rates three times later in the year to provide some offsetting economic stimulus.
Now, in addition to uncertainty, Trump’s plan on more tariffs is his call for “mutual tariffs” that raises the US obligation to match higher tariffs charged by other countries, particularly from the other countries. Trump could also impose many tariffs on the European Union, India, computer chips, cars and medicines.
“Everything else that comes down the pipeline adds to uncertainty,” said Antonio Rivera, a partner in international trade practices at the law firm Arentfox Schiff.
The Whiskeyjack Boutique gift shop in Windsor, Ontario attracts regular customers. Americans apologise for Trump’s decision to launch a trade war with Canada.
“They are regretted by what is going on, and they don’t support what is going on. They don’t like Canada being drugged into the mud about this,” said store co-owner Katie Stokes.
Stokes has also heard Canadians plan to cancel plans to take vacations in the US.
“It’s almost regretful and sad like people are upset, and they don’t love how this is unfolding,” she said.
Jaimie Ding is a staff writer for the Associated Press in Los Angeles. Anne de Inosio of New York and Dee Anne Durbin of Detroit. Mike Hasciel of Windsor, Ontario, Canada. Megan Janetsky from Mexico City. Steve Karnowski of Minneapolis contributed to this report.
Original release: March 5, 2025 7:34am EST
