Why can’t I buy groceries at a normal price?
By NEVAEH KARRAKER— nakarraker@ucdavis.edu
An empty wallet is something all college students carry. However, it may soon be possible to possess not just an empty wallet, but a negative wallet — a direct result of the wave of tariffs currently unfolding upon consumers who can least afford necessities.
For context, Mexico recently began specializing in the automotive industry rather than oil or energy. After supply chain disruptions caused by COVID-19, Mexico redirected its efforts to prioritize regional trade and nearshoring in order to amplify protectionism. In other words, seeking a supplier within close proximity to increase restrictions on imports and encourage a domestic industry. When the United States’ demand for the automotive industry surged, China’s lingering tariffs made it more cost-efficient for the U.S. to export auto parts to Mexico for assembly and then import them back into the U.S. to sell on the market.
This, combined with labor-intensive, inexpensive “maquiladoras,” allowed Mexico to surpass China in 2023 as the top source of imports into the U.S., for the first time in two decades.
Despite this positive economic growth, the U.S. remains in a serious debt crisis; In 2024 alone, there was a trade deficit of over $900 billion. As inflation and the cost of living increase, the minimum wage remains insufficient to cover basic living expenses for most Americans.
As of March this year, President Donald Trump imposed 25% tariffs on steel production for Canada and Mexico, as well as increased tariffs from 10 to 20% on Chinese imports. In response, Mexico’s President Claudia Sheinbaum Pardo declared that the country will impose retaliatory tariffs. Canada and China have also vowed to strike back, sparking mass panic over a global trade war. Trump addressed these concerns by postponing the tariffs until April — for many, relief is deeply felt.
In theory, tariffs could replenish domestic employment through increased wages and job opportunities. They could also generate revenue to assist in paying off debt via the redirection of currency and the encouragement of a competitive market.
However, tariffs can also lead to high interest rates, supply chain disruptions and increased costs that ultimately burden consumers.
Consumer prices have remained at an all-time high in recent years, due to factors like inflation, the avian influenza outbreak and subsidies related to climate change initiatives. These specific tariffs instated by Trump will mostly influence the cost of electronics, clothing and automobiles. An additional 10% tariff on Canadian energy imports will likely impact transportation, thus increasing food prices.
The U.S. is an industrial nation capable of being, to some extent, self-sufficient. Even so, the benefits of trade far outweigh remaining internally sufficient, as it provides opportunities for market specialization, global alliances and economic growth. The ambition and desire to maximize profit and minimize labor costs frequently backfires by exceeding acceptable dependence on other countries.
Trump aspires to redirect focus on American industries, similar to the 35% tariff on Chinese tires instated in 2009 in order to improve American manufacturers’ profits and reduce job losses. He also hopes that these tariffs will coerce Canada and Mexico to enhance their dedication toward fentanyl trafficking intervention and illegal immigration prevention.
When cleaning your room, it generally becomes shockingly disorganized before it improves. This is the logic Trump is using to justify imposing tariffs on our closest trade partners, and it is clearly not entirely applicable to everything. While tariffs indirectly encourage consumers to invest in domestic businesses rather than foreign ones — which overall improves the economy — they also provoke frustration and difficulties for those already financially struggling.
Regardless of whether or not the long-term result of Trump’s actions will be beneficial via the elimination of trade imbalances and attraction of foreign direct investment, the immediate aftermath is concerning.
After the tariffs were instated, the stock market decreased by 2% and Dow Jones dropped 150 points. Now, investors fear a potential recession. The impacts also extend beyond the U.S., as Mexico’s stable economic growth will largely be stunted. As a result, there could be ripple effects on the U.S., including a lower demand for American exports and job losses in sectors related to Mexico’s agricultural industries.
Further, the political tensions between all countries are expected to escalate, especially with Mexico given the present strains on border security. The true impact of this decision remains uncertain — leaving consumers, as well as companies, holding their breath in anticipation.
In the meantime, instead of panicking, students can stay informed about updates and practice budgeting. Smart financial decisions, such as alternative transportation or shopping methods, might alleviate the consequences. Compared to a negative wallet, students may find that an empty one is a luxury.
Written by: Nevaeh Karraker—nakarraker@ucdavis.edu
Disclaimer: The views and opinions expressed by individual columnists belong to the columnists alone and do not necessarily indicate the views and opinions held by The California Aggie.
