Some WNY experts foresee severe short-term pain from Trump tariffs
President-elect Donald Trump says he will slap 25% tariffs on imports from Canada and Mexico. But experts say that will cause a lot of short-term pain in Western New York, along with at least a shot at some long-term gains.
President-elect Donald Trump calls “tariff” his favorite word – but the levies he’s proposing on imports from Canada and Mexico are not exactly a favorite among academics and local business leaders.
Then again, those same academics and business leaders are not entirely sure that Trump really meant it when he proposed a 25% tariff on all goods imported from America’s two closest neighbors.
“It just screams of a negotiating tactic, and we’ve seen Trump do this many times,” said Scott Laing, clinical assistant professor of finance at the University of Buffalo’s School of Management.
Meanwhile, Damon Piatek, chairman of the World Trade Center Buffalo Niagara, said he viewed the threatened 25% tariffs as “saber rattling.”
Then-President Donald Trump talks with Canadian Prime Minister Justin Trudeau during a G-7 Summit in Charlevoix, Canada, in 2018.
Trump is now proposing 25% tariffs on all goods imported from Canada and Mexico. Associated Press
No matter what they are, though, Trump’s proposed tariffs have stirred warnings that they could have dire economic impacts in Western New York. Trade experts said the levies would invariably raise prices on everything from gasoline to groceries, while potentially wreaking havoc in the transborder auto industry as well as any other that ships products over North America’s borders.
Tariffs also might eventually lead some companies to expand manufacturing in the U.S., but George Palumbo, a professor of economics at Canisius University, said any growth would come at great risk of higher inflation and disrupted supply chains.
“There’s a lot of uncertainty – most of it bad,” Palumbo said.
What Trump proposes
Trump’s proposal is far more extensive than the targeted tariffs he imposed on imported steel, aluminum and many Chinese manufactured goods during his first term as president.“On January 20th, as one of my many first Executive Orders, I will sign all necessary documents to charge Mexico and Canada a 25% Tariff on ALL products coming into the United States, and its ridiculous Open Borders,” Trump said on his Truth Social website on Monday. “This Tariff will remain in effect until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop this Invasion of our Country!”
Trump’s post came as a surprise in light of the fact that his first administration renegotiated a longstanding free trade pact among the U.S., Canada and Mexico on terms that were more favorable to the U.S. Several sources said any new tariffs would be an obvious violation of that deal.
“He would have to pull out of that prior to installing these tariffs,” Piatek said.
And pulling out of the U.S.-Mexico-Canada Agreement – USMCA for short – would shatter the friendly trade arrangements that North America has operated under for decades, said Edward Alden, a senior fellow at the Council on Foreign Relations who specializes in trade and cross-border issues. The result could be a trade war where Canada and Mexico respond with tariffs on American goods.
“This is a fundamental transformation in the rules that have governed trade in North America for the last half century,” Alden sad. “It just basically opens the door to each of these three countries doing whatever they decide to do in their short term economic and political interests.”
Inflation?
The immediate impact of such a dramatic move would be higher prices, several sources interviewed for this story said.And one quick impact could come at the fuel pump. Federal statistics show that Canada accounted for slightly more than half of U.S. oil imports in 2022, and Mexico was America’s second-biggest source of imported oil, accounting for 10% of petroleum imports.
Increase the cost of those products by slapping on a big tariff when they cross the border, and that cost will invariably be passed on to consumers, the American Petroleum Institute warned on its website.
“Tariffs are taxes on imported goods that increase costs for consumers,” the group said. “Consumers, not countries, bear the burden of these additional costs.”
Food prices are expected to rise as well if Trump acts on his tariff threat. After all, federal statistics show that Mexico is by far the leading source of fruits and vegetables imported to the U.S., while Canada ranks as the leading supplier of imported meat. Grocers are expected to pass along the cost of those tariffs to consumers.
“We would see a large spike in grocery prices,” said Laing, of UB.
A shaken supply chain?
For Western New York manufacturing firms, the main impact of such a steep tariff would vary by industry, with the auto industry expected to be among the most affected.The U.S. and Canada first signed a trade agreement liberalizing cross-border trade in the auto industry in 1965, and that has led to a binational auto manufacturing market where vehicles assembled in the U.S. frequently include parts made in Canada, and vice versa. For example, the Ford Motor Co.’s Hamburg stamping plant sends the largest number of parts it makes to an assembly plant in Oakville, Ont.
And since the signing of the North American Free Trade Agreement in the 1990s, auto parts – and fully assembled vehicles – are also frequently shipped across the Mexican border. General Motors and Stellantis are among the automakers that assemble vehicles in Mexico for import into the U.S.
That being the case, Wells Fargo analysts last week warned that the tariffs could raise the average vehicle cost by $2,100 while costing the big three U.S. automakers billions.
But Peter Ahrens, executive director of the Buffalo Niagara Manufacturing Alliance, said the tariffs Trump has talked about could be beneficial or detrimental to local manufacturers, depending on where they source their materials. Manufacturers who get all their materials from within the U.S. could find their products suddenly cheaper than imports, he said.
And if the Trump tariffs were to become a semi-permanent feature of the world economy, some manufacturers would likely decide to keep – or even open – manufacturing facilities within the U.S. That could benefit facilities that are now slated for closure, such as the Sumitomo tire plant in the Town of Tonawanda, said Palumbo, of Canisius.
If imported tires are suddenly more expensive, “somebody’s going to find it worth their while to open it up again,” Palumbo said.
Political reaction
Democrats lashed out at Trump’s proposed tariffs.“Such an approach to America’s trade policy will put jobs at risk and increase costs for American families,” said Sen. Kirsten E. Gillibrand, a New York Democrat.
“We’re already hearing from businesses in the district that this could have a negative impact on the market for them, creating chaos and instability locally and across the country,” said Rep. Tim Kennedy, a Buffalo Democrat.
Republicans, meanwhile, took more of a wait-and-see approach.
“I look forward to working with President Trump to put American workers and companies first and implement commonsense trade policies that will secure our supply chains, promote American competitiveness and address unfair trade practices from bad actors, like China,” said Rep. Claudia Tenney, a Republican who lives in Oswego County.
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