REGIONAL- President Donald Trump sent the stock markets spiraling downward early this week when he followed through on his threat to impose 25 percent tariffs on imported goods from Mexico and Canada, an additional ten percent tariff on goods from China, and a ten percent tariff on Canadian energy products. Investors and economists alike reacted to the inflationary pressures certain to come as a result of the action, particularly with the economy showing signs of slowing overall.
The Budget Lab at Yale, a non-partisan policy research center that analyzes the impact of federal economic policy proposals, has estimated that should Trump’s tariffs remain in place through the end of the year, they would cost the average American family between $2,700-3,400. And a significant portion of the increase will come in transportation costs. Prices for gasoline, auto parts, and new car and truck purchases are all expected to soar with the new tariffs.
The U.S. imports nearly 4 million barrels of oil per day from Canada, roughly 60 percent of the country’s net oil imports. About 70 percent of that oil goes to refineries in the Midwest, including Minnesota’s two oil refineries, the Flint Hills Resources Pine Bend Refinery in Rosemount and the St. Paul Park Refinery, and the much smaller Cenovus Energy refinery in Superior, Wis. All three refineries are heavily dependent on imported Canadian crude, supplemented by oil from North Dakota.
When Trump first announced the tariffs a month ago, petroleum analyst Patrick DeHaan at Gas Buddy, said that northern parts of the country would bear the brunt of the tariff increases.
“And who will be impacted? Primarily motorists in the Great Lakes could see gas prices shooting up in excess of 20 cents a gallon. A lot of that Canadian crude oil flows directly down into areas like the Great Lakes, the Midwest, the Rocky Mountain regions, where it may be difficult to find different sources of crude oil.”
DeHaan has since revised that estimated increase to a range of 10 to 25 cents per gallon.
The Timberjay contacted Edwards Oil in Virginia for more insight, but owner Bob Skalko said it was too early to tell and declined to speculate.
What’s certain is that the gasoline futures market has jumped since last Friday. Quoted in price per gallon before gasoline is blended with ethanol, the futures price jumped from $1.9703 on Friday to $2.1942 at the close of trading on Monday, an 11 percent increase that falls in line with Trump’s ten percent tariff.
It’s likely that drivers will also see increased maintenance costs for their vehicles, as well over half of auto parts imports come from Mexico (40.4 percent), Canada (10.3 percent), and China (9.2 percent). Some parts, such as transmissions, use metals sourced from Canada and are partially built in the U.S., then shipped across the border to Mexico for completion, incurring the Trump’s tariffs on both the raw materials and completed transmission. This multi-country production is reflected in everything from electric switches and circuit boards to brake parts.
And since cars and trucks made in the U.S. are built with parts from the same complex supply chain, it won’t be just the 22 percent of cars imported from Mexico and Canada that will be hit with price hikes, as there is no such thing as an all-American automobile anymore. On Tuesday, FOX Business reported on an analysis by the Anderson Economic Group (AEG) that concluded manufacturing costs for a crossover utility vehicle would rise by at least $4,000 due to the tariffs, while a large SUV with a significant amount of content from Mexico would rise by about $9,000. AEG estimated pickup truck manufacturing prices would go up $8,000, and electric vehicles would see the biggest cost increases of all, over $12,000.
Kelley Blue Book, producers of the industry standard pricing guide, reported last week that prices of both new and used vehicles would go up if tariffs were enacted, as the higher prices on new vehicles would increase demand for more affordable used ones. KBB also reported that another study found that car insurance rates will also spike.
The administration may have reacted to the plummeting stock market when, on Tuesday, U.S. Commerce Secretary Howard Lutnick said that the tariffs might be reduced, but not eliminated, as early as Wednesday.
“I think he’s (Trump) going to work something out with them,” Lutnick said on FOX Business. “It’s not going to be a pause, none of that pause stuff, but I think he’s going to figure out, you do more, and I’ll meet you in the middle some way, and we’re going to probably be announcing that tomorrow.”
The original tariffs were still in place as the Timberjay reached its press time.