Trump's Tariffs: A Storm Brewing for Commodity and Energy Markets

As Donald Trump prepares to take office for his second term, the specter of increased tariffs looms large over global trade, with significant implications for commodity and energy markets. The president-elect has threatened to impose tariffs of up to 25% on goods from Mexico and Canada, and 10% on Chinese imports, including energy products. This article explores the potential impacts of these tariffs on key commodities and energy sectors, as well as the broader economy and geopolitical relations.

Avocados and other fruit and veg

The US imports between half and 60% of its fresh produce from Mexico, with 80% of its avocados coming from there. Canada also supplies a significant amount of the US's fruit and vegetables. Increased tariffs will quickly be passed on to consumers in the form of higher prices. While the US still grows a considerable amount of its own produce, overreliance on domestic goods will also lead to increased prices (economists' warning).

Petrol and oil prices

Oil and gas prices are likely to be impacted, as Canada provides around 60% of US crude oil imports and Mexico roughly 10%. Most US oil refineries are designed specifically to process Canadian products, which would make changing supply sources complex and costly. There has been some speculation that Mr. Trump may exempt oil from the new changes, but if he doesn't, the US could see an increase in fuel prices of up to 50 cents (40p) a gallon, economists have predicted.

Cars and vehicle parts

The US car industry is a delicate mix of foreign and domestic manufacturers. The supply chain is so complex, car parts and half-finished vehicles can sometimes cross the US-Mexico border several times before they are ready for the showroom. If this continues, the parts would be taxed every time they move countries, which would lead to an even bigger increase in prices. To mitigate this, General Motors has said it will try to rush through Mexican and Canadian exports - while brainstorming on how to relocate manufacturing to the US.

Electronic goods

When Donald Trump imposed a 50% tariff on imported washing machines during his first term in 2018, prices suffered for years afterwards. China produces a lot of the world's consumer electronics - and smartphones and computers specifically - so the 10% tariff could have a similar effect on those devices. The Biden administration tried to legislate to promote domestic production of semiconductors (microchips needed for all smart devices) - but for now, the US is still heavily reliant on China for its personal electronics, leading to increased prices for consumers unless tech companies can relocate their operations away from Beijing.

Steel industry

The sector that could feel the most benefit from the Trump tariffs is the steel and aluminium industry. It has long been lobbying the government to put tariffs on foreign suppliers - claiming they are dominating the market and leaving US factories without enough business and at risk of closure. Steel imports increasing in price would promote domestic production - and possibly save some of the plants. But when Mr. Trump increased steel tariffs during his first term, prices also increased - which business leaders said forced them to pass on costs and left them struggling to complete construction projects on budget.



Overall inflation

An increase in the prices of all these goods would inevitably lead to widespread overall inflation. A

United States president-elect Donald Trump has called “tariffs” his “favorite word” and made them a key tenet of his economic agenda during the 2024 election campaign. He employed the use of import tariffs and other duties throughout his first term as president, including on aluminium and steel. And for his second term, Trump is particularly focused on upping the ante on China and has said he plans to introduce new duties “from day one” of taking office on January 20. To that end, market participants expect the president-elect to come out of the gate all guns blazing – largely because Trump has already outlined his plans to impose a 25% tax on all products entering the United States from Canada and Mexico, with an additional 10% tariff going on to goods from China, taking those tariffs up to 60%. Tariffs will stay in place, he wrote on his own social media platform Truth Social, “until the inflow of drugs and illegal immigration into the United States comes to an end.”

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In this article, we have explored the potential impacts of Trump's proposed tariffs on key commodities and energy sectors, as well as the broader economy and geopolitical relations. While the full extent of the consequences remains to be seen, it is clear that these tariffs could have significant implications for global trade, supply chains, and consumer prices. As the new administration takes office, investors and businesses will be closely watching the developments, and adjusting their strategies accordingly.