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- President-elect Donald Trump is set to implement significant tariff changes, affecting various industries including automotive and grocery.
- Grocery prices are expected to rise by 2% in 2025, with food prices away from home increasing by 3.5%.
- The new tariffs and economic policies could lead to higher inflation and interest rates.
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Essential Context
As Donald Trump prepares to begin his second term, several key economic policies are set to impact Americans. One of the most significant changes involves the introduction of new tariffs on goods from outside North America.
Core Players
- Donald Trump – President-elect of the United States
- US-Mexico-Canada Agreement (USMCA) – Trade agreement exempting Canada and Mexico from new tariffs
- US Department of Agriculture (USDA) – Agency predicting food price increases
- Global grocery retailers – Companies like Walmart, Amazon, and Costco
Key Numbers
- 10% – Proposed universal tariff on goods from outside North America
- 30% – New tariff on goods from mainland China
- 2% – Expected increase in all food prices in 2025
- 3.5% – Expected increase in food prices away from home in 2025
- 25% – Existing tariff on electric vehicles from mainland China
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The Catalyst
President-elect Donald Trump’s plan to implement new tariffs is a significant catalyst for the economic changes expected in 2025. These tariffs will cover all goods from outside North America, with Canada and Mexico likely exempt under the USMCA.
“We expect an extended period of heightened policy uncertainty, which will have real-world impacts on economies,” according to S&P Global Mobility.
Inside Forces
The automotive industry is particularly impacted, with a universal tariff expected to be around 10%, up from the current 2.5%. Goods from mainland China will face a 30% tariff, and electric vehicles from China will continue under the existing 102.5% tariff.
Trump’s administration also plans to make changes to US emissions requirements, which could reduce battery-electric vehicle volumes and adjust the electrification mix. By 2030, the US BEV mix is forecasted to be about 30%, down from prior projections of about 40%.
Power Dynamics
The power to impose these tariffs lies with the president, who can act using executive orders under the International Emergency Economic Powers Act (IEEPA). This authority allows for rapid implementation of new tariffs without needing Congressional approval.
Trump’s administration is expected to review the USMCA in mid-2026, which could lead to changes in tariffs for Canada and Mexico.
Outside Impact
The global impact of these tariffs will be significant. Europe, a major exporter to the US, will see substantial effects on its manufacturing economies, potentially worsening internal markets and job prospects.
ASEAN markets, which have benefited from resourcing out of mainland China, may experience delayed auto sales recovery due to slower US exports and a slower China market.
The USDA predicts that grocery prices will rise by 2% in 2025, and prices for food away from home will increase by 3.5%. This rise comes after years of high inflation, with food prices up 28% since 2019.
Future Forces
The coming year is likely to see continued focus on value in the grocery industry. Consumers will seek out discounts and promotions to manage their food budgets, and retailers will need to adapt by sharpening their pricing and promotional strategies.
Mergers and acquisitions in the grocery sector may increase as the industry adjusts to new trade policies. Traditional grocers will face intense competition from discounters like Walmart and Amazon.
The overall economic impact includes a potential trade war, increased inflation, and higher interest rates. The world GDP forecast for 2025 is expected to be lowered due to these revised assumptions, with mainland China facing the biggest hit.
Data Points
- Jan. 20, 2025 – Trump’s inauguration date when new tariff policies are expected to be announced.
- Mid-2025 – Expected implementation of universal tariffs on goods from outside North America.
- Mid-2026 – Review of the USMCA, potentially affecting tariffs for Canada and Mexico.
- 2030 – Forecasted US BEV mix to be about 30%, down from prior projections of about 40%.
- 2% – Expected increase in all food prices in 2025.
- 3.5% – Expected increase in food prices away from home in 2025.
The upcoming economic landscape under Trump’s second term is marked by significant changes in tariff policies, grocery prices, and broader economic implications. These changes will require companies and consumers to adapt quickly to mitigate potential negative impacts.
