Trump's Tariffs to Take Effect on Tuesday for Trade Partners

February 2, 2025  by Karen Parrish in Business Strategy, Industry   

The duties on all three countries will be in full force by Feb. 4, according to the Executive Order signed by President Trump on Saturday afternoon in Florida. By declaring a national economic emergency under the 1977 International Emergency Economic Powers Act (IEEPA), he is able to have the authority to get the tariffs in place and move quickly. The use of the law does open him up to legal challenges.

Also ready to move quickly are Canada, Mexico and China with retaliatory measures in place across a range of goods. Canada's Prime Minister Justin Trudeau posted on X on Friday, "Canada's ready with a forceful and immediate response."

However, Trump's executive order also includes a retaliation clause which could increase any of the US tariffs in place in response to their retaliatory measures.

The big question a lot of people have, "Why should I care about tariffs? It's all about taxes on other countries, right?"

No, it's not.

Tariffs imposed by the U.S. are generally paid by U.S. consumers. Here's how it works, in, a hopefully easy to understand explanation (with some help from an earlier article on Yahoo! Financial. Check the whole article out, for a more detailed explanation):

The definition of a tariff is, (noun) A system of government-imposed duties levied on imported or exported goods.

Tariffs are imposed for a variety of reasons from revenue generation (not usually, since the cost is passed onto the consumer, more on that later), domestic jobs, national security/defense, human rights issues, or economic retaliation.

The importing country is the one who actually pays the tariff. It is collected when goods clear customs at the importing country's port of entry. You pay whatever price they are charging in THAT country, and if you want to get the goods into YOUR country, then you have to pay the import tariffs. These additional costs are almost always passed onto consumers. Tariffs are sometimes levied in hopes more consumers will buy domestically.

According to the article on Yahoo!finance, "The effect of tariffs on jobs is hotly debated. The tariffs Trump introduced on steel and aluminum (during his first presidency) were politically popular... The jobs that are saved from tariffs often come at a high cost. The Peterson Institute for International Economics found that every job in the steel industry saved by the 2018-19 tariffs cost American consumers and businesses $900,000."

And finally, "Do tariffs affect inflation?" This is the big question right now. Tariffs can and often do lead to higher prices, but on the last go-around, Trump's tariffs were well before the pandemic caused inflation to soar.  So, we will see how this round of tariffs will affect the very delicate economy we have going presently, and how the Fed will respond as it plays out.