President-elect Donald Trump plans to institute a 25 percent tariff on imported goods. Economists have consistently said this will lead to higher prices for consumers, particularly in Houston.
A tariff is a tax on imported goods. The goal of a tariff is to both raise revenue for the federal government while increasing the prices of foreign products, hoping that will encourage Americans to buy domestically. Deployed strategically, they can be beneficial. Deployed badly, they can turn a regular depression into the Great Depression.
When Trump first took office in 2016, he inherited one of the healthiest economies in living memory. He instituted tariffs designed to help create manufacturing jobs, but it mostly led to a trade war with China the United States definitely lost. Still, the overall negative impact was relatively minor.
Things are quite a bit different in 2024. The COVID pandemic decimated the world’s economy. Though America has recovered remarkably well in the last four years, inflation and other economic woes have left the United States in comparative shaky ground. This time, Trump’s tariffs are likely to push prices back up just as inflation has begun to settle down.
“The impact would be quick, sudden, and sure, with inflation raging across the economy over the first several months,” economist Ed Hirs, energy fellow at the University of Houston, told Houston Public Media.
Texas imports an enormous amount of goods from Mexico, and Houston as the state’s largest city receives the lion’s share of them. According to Hirs, prices on produce and automobiles would immediately climb. Audi, Toyota, Volkswagen, Chevrolet, and Ford all have factories assembling cars and parts in Mexico, and each unit moved across the border will be subject to Trump’s 25 percent increase, which the manufacturers will pass onto the consumers to pay.
Then there’s the oil. Contrary to popular belief, just because the United States is a net exporter of oil doesn’t mean we don’t import a ton of it. Oil is an international marketplace where barrels are sold to the highest bidder and prices are determined by a variety of local factors.
The United States imports 4 million barrels of crude oil a day from America, an amount absolutely essential to American refineries. An increase of 25 percent would be immediately felt at the pump, driving gas prices quickly back up with the summer driving season looming.
Lastly, there is the trade war aspect. Other countries will not stand by and let America impact their exports without retaliation. China reduced their importation of American grain during Trump’s first term, hurting farmers significantly. Cotton and meat make up more than $5 billion of Texas exports. The loss of international markets to a trade war would devastate farmers and ranchers, who are likely to already be struggling thanks to Trump’s planned mass deportations. If Trump gets his way on tariffs, it could mean some very bleak times for Texas.
