HONOLULU (KHON2) — Just hours before President Donald Trump was set to impose a 25% tariff on goods from Mexico and Canada, both countries have cut a 30-day deal, putting off a potential North American trade war.
The president has been threatening tariffs as a punishment for Mexico and Canada allowing illegal drugs and migrants to cross their borders into the U.S.
He’s also going after China, saying the government there is not doing enough to stop the flow of fentanyl to the U.S.
He’s called for a 10% tariff on all goods from China, a 10% tariff on Canadian energy and a 25% tax on all other goods from Canada and Mexico.
Economists say tariffs will increase U.S. prices and stunt growth.
The U.S. imports billions of dollars worth of vegetables and fruit from Mexico and billions of dollars worth of beef, mushrooms and grain from Canada each year.
And because Hawaii imports 85 to 90 percent of all its food, a 25% tariff will be felt deeply from restaurants to grocery stores.
“Really the auto industry has the potential to be hit the hardest if the tariffs on Mexico were to go through, and then lots and lots and lots of food products,” explained UHERO’s Carl Bonham.
He said auto parts go through multiple countries while a vehicle is in production.
The Hawaii farm bureau says 80% of fertilizer ingredients come from Canada which is used in farming and food production, and grain feed is also imported from Canada.
“That will increase the cost for the farmers which ultimately will increase the cost of the food to produce which comes over,” explained Brian Miyamoto, Hawaii Farm Bureau Executive Director.
And he’s worried about Hawaii farmers who export goods like coffee, papaya and macadamia nuts.
“Will another country fill the market share over there? And will we be able to recover? We don’t know,” he added.
Canada is one of the worlds largest producers of softwood lumber. There’s already a 14.5% tariff on Canadian lumber and with Trump’s new policy, it would raise lumber prices to nearly 40%.
“Our home builders are already under tremendous pressure on the price point so anything that exasperates the price of a home will have an impact on our home builders and home buyers, especially first time home buyers,” explained Andrew Pereirra, Director Public Affairs for Pacific Research Partnership.
And it could impact the tens of thousands of people trying to rebuild homes from Lahaina to Los Angeles.
Bonham says the uncertainty of what will happen makes it difficult for businesses, and leaders to plan ahead.
“Most of our products are appliances so it’s made out of steel and aluminum, so obviously it’s going to impact our margins and sales because the price of the materials is going to go up higher,” explained small business worker Murad Allwer, who works at the Discount Store on Pensacola.
Medicine, cars, and electronics will also be subject to higher prices, but Bonham said Hawaii is very dependent on the U.S. mainland right now.
“We’re really, really dependent on the U.S. economy staying strong and continuing to send visitors here to spend money because I mean really our tourism is almost all, it’s like 70 to 80% U.S. visitors right now,” Bonham said.
Bonham said the U.S. imports a large amount of energy including petroleum, natural gas, and electricity from Canada. “If you take out the energy products, we have a trade surplus with Canada, so I think most economists have a really hard time understanding why you would impose 25% tariffs on Canada.”
He said with higher taxes on a similar product, it could force the cheaper product to raise their price.
“If you’ve been buying something for years and years from the most efficient producer, then when you substitute to the less efficient producer, you end up with higher costs,” he explained. “And in the near term, because you can’t easily substitute, you end up with higher cost.”