Opinion: Tariff price increase starts to impact the U.S. (2025)

By: EditorialPosted: 2:01 AM CDT Tuesday, Apr. 1, 2025

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Opinion

Look, it’s the tariff chickens, already coming home to roost. And U.S. tariffs have only just begun.

Last week, U.S. President Donald Trump’s policies on trade and immigration were credited with halting a light-rail project in California, because those policies played a part in a massive price increase for the project

“A potential contract for constructing the long-awaited light-rail extension from Pomona into San Bernardino County was rejected because the bid ran hundreds of millions of dollars over budget due to inflation, rising labour costs, market uncertainty and Trump’s tariffs, officials announced on Wednesday, March 26,” the Los Angeles Daily News reported.

There was one only one bidder for the light-rail project, and the bid came in at US$954 million — 54 per cent higher than budgeted.

The newspaper reported that the Metro Gold Line Foothill Extension Construction Authority Board had “heard a report from the chief economist of the Associated General Contractors of America warning of higher costs and risks associated with the light-rail project … it highlighted the factors that are driving up rail construction. These included ‘recently announced tariffs’ by President Donald Trump raising the cost of steel and aluminum products from China and other countries by 25 per cent that took effect March 12. Besides higher costs for materials, the report noted other factors that would drive up construction costs, such an increase in wages due to not enough construction workers and the Trump administration immigration policies.”

Obviously, the Trump tariffs on steel and aluminum aren’t the only tariffs the U.S. president has put in place — there are already-announced new tariffs coming into place shortly for cars and car parts imported into the United States, and looming tariffs 25 per cent tariffs on Canadian and Mexican goods entering the U.S. — plus a suite of reciprocal tariffs that Trump plans to announce within days.

And those chickens will soon be looking for their roosting places as well.

The Associated Press reported Friday that Americans can expect a broad range of knock-on effects from the automotive tariffs in particular, not just an increase in new car prices — but with Americans facing price hikes for car repairs, used cars and even automobile insurance as a result.

That’s because suppliers don’t have the overheads to absorb the tariffs, and will be forced to pass them on — repair facilities will have to pass on the costs of parts, and, as AP reports, six out of every 10 motor vehicle parts is imported from Mexico, Canada and China.

Used car dealers, forced to repair vehicles before they can be resold, will also have to pass on their parts costs to new buyers — and, further down the line, automobile insurers will also have to increase premiums to help cover the increased cost of replacement parts used in vehicle repairs, especially for specialized, manufacturer-specific parts. (The insurance price increases will be the tail of the costs dog, coming 12 to 18 months after the effects of tariff increases begin to insurance-related repair costs. The American Property Casualty Insurance Association forecasts that U.S. personal auto insurance claims costs could rise by between US$7 billion and US$24 billion annually, all of which would have to be recovered from insurance customers.)

Trump has maintained that suppliers will absorb the costs of his tariffs and that the U.S. government will collect a huge windfall. But just the uncertainty his trade policy has created for business has stalled projects, cost the U.S. stock market US$5 trillion in losses in the last three weeks alone.

And that’s before you even start considering the damage to the U.S trading relationship with countries that used to be its best trading partners.

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