On the 25th of this month, U.S. President-elect Trump announced his intention to impose a 25% tariff on all goods entering the United States from Mexico and Canada. Additionally, President-elect Trump also revealed a 10% tariff increase on Chinese imports. This strategic decision refines the initial proposal made by President-elect Trump in an interview last year, which suggested a universal 10% tariff on imported goods.

The primary goal of Trump's tariff policy is to protect domestic industries, reduce dependence on Chinese imports, and encourage the relocation of critical supply chains back to the U.S., aiming to reshape the nation's trade landscape. However, according to a study by the National Retail Federation (NRF), the implementation of Trump's proposed tariff adjustments could potentially lead to American consumers losing up to $78 billion in annual purchasing power. The study highlights that these tariffs will impact various consumer sectors, including clothing, toys, furniture, appliances, footwear, and travel items.

Moreover, an in-depth analysis by Reuters emphasizes a trend of increased thriftiness among American consumers in recent years, resulting in reduced discretionary spending and increased pressure on retailers and consumer goods companies. Jonathan Gold, Vice President of Supply Chain and Customs Policy at the National Retail Federation, stressed the importance of imported goods and components for retailers to offer a diverse range of affordable products. The introduction of these import tariffs is expected to disproportionately affect low-income families as the costs are passed on to consumers, leading to price hikes.

Furthermore, the enforcement of this policy is likely to present additional challenges to American consumers and businesses, negatively impact the U.S. economy, and pose threats to employment. The International Monetary Fund (IMF) warns that severe trade disconnection and significant tariff implementations could result in a global GDP reduction of nearly 7%, equivalent to the combined economies of France and Germany. Additionally, S&P Global forecasts that such tariff measures could increase the U.S. Consumer Price Index (CPI) by up to 1.8 percentage points, potentially causing inflation to rise during Trump's initial year in office.

The currency markets reacted strongly to this announcement. The U.S. Dollar Index surged by approximately 30 points, surpassing the 107 mark. Concurrently, the offshore Chinese Yuan neared the 7.26 level against the U.S. Dollar, while the Australian Dollar and Canadian Dollar weakened against the U.S. Dollar, and the Mexican Peso extended its decline against the U.S. Dollar by 1.2%. Additionally, there were notable fluctuations in the precious metals market.

President-elect Trump specifically stated that a 25% tariff would be imposed on all products from Mexico and Canada, with an executive order scheduled for his first day in office. This tariff will remain in place until drug trafficking and illegal immigration into the United States cease. This tariff ultimatum underscores President-elect Trump's strategic intention to utilize tariffs as a tool to advance his policy objectives.