"40% Cheaper in China": What the Big Mac Index Says About Trump's Tariff Plans

In the realm of economic indicators, few are as simple and relatable as the Big Mac Index. This playful tool, created by The Economist, compares the price of a McDonald's Big Mac in different countries to assess the relative strength of currencies and the economic health of nations. With President Trump's recent tariff plans, the Big Mac Index offers valuable insights into the potential impact of these policies on the US economy and the targeted countries.

The Big Mac Index provides a baseline for the relative purchasing power of currencies in the US and targeted countries. In 2025, a Big Mac costs $5.79 in the US, $3.52 in China, $5.18 in Mexico, and $5.74 in Canada. These prices suggest that the yuan is undervalued by 40% against the dollar, the peso is undervalued by 12%, and the Canadian dollar is overvalued by 3% (source: The Economist).

After the implementation of tariffs, the Big Mac Index can help assess the impact of these policies on the cost of living and economic development in targeted countries. For instance, if the US imposes a 25% tariff on Mexican goods, the price of a Big Mac in Mexico might increase due to higher production costs. This could lead to an increase in the Big Mac Index for Mexico, suggesting a higher cost of living and potential economic hardship for Mexican consumers.

Similarly, if the US imposes a 10% tariff on Chinese goods, the price of a Big Mac in China might also increase. This could result in a higher Big Mac Index for China, indicating a higher cost of living and potential economic strain for Chinese consumers.

In contrast, if the US imposes a 10% tariff on Canadian energy products, the price of a Big Mac in Canada might not change significantly, as energy products are not a major component of the Big Mac's cost. This could maintain the Big Mac Index for Canada, suggesting a stable cost of living and economic development in Canada.

By comparing the Big Mac Index before and after the implementation of tariffs, economists and policymakers can gain insights into the potential impact of these policies on the comparative cost of living and economic development in targeted countries. This information can help inform decisions about trade policies and assess the effectiveness of tariffs in achieving their intended goals.

In conclusion, the Big Mac Index offers a unique perspective on the potential impact of Trump's tariff plans on the US economy and the targeted countries. By comparing the price of a Big Mac in the US with the price in targeted countries, the Big Mac Index can provide valuable insights into the comparative cost of living and economic development in these countries. As the US and its trading partners navigate the complex landscape of international trade, the Big Mac Index serves as a reminder that the true cost of tariffs extends beyond the numbers on a balance sheet, affecting the everyday lives of consumers around the world.