Trump's proposed tariffs could hike prices, disrupt spending, experts warn

As the U.S. prepares to implement new tariffs under the Trump administration, concerns are mounting over the impact on prices across a wide range of industries.

Even products considered recession-proof, like beer and liquor, are not immune to these tariff increases. In anticipation of the proposed 25 percent tariff on goods from Mexico and Canada, businesses in the liquor industry are already stockpiling products like tequila and popular Mexican beers, such as Modelo.

Dave Williams, president of Bump Williams Consulting, an analytics service for the alcoholic beverage industry, explained that smaller businesses, in particular, would have no choice but to pass these additional costs onto consumers.

Impact on key sectors from food to automobiles

While the intention of the tariff plan is to strengthen U.S. manufacturing and address trade imbalances, it could potentially drive up costs across various sectors, from food to automobiles to everyday consumer products.

The food industry is one of the first to feel the impact. Mexico, a major supplier of fresh produce to the U.S., could face increased costs due to tariffs. The Produce Distributors Association, a Washington trade group, has warned that this could lead to higher prices of grocery, like fruit and vegetables, for American consumers.

Similarly, the auto industry could see price hikes, especially for cars imported from Mexico and Canada. Ed Brzytwa, vice president of international trade at Consumer Technology Association, said that tariffs could push car prices even higher, which are already at historic levels due to supply chain disruptions.

The electronics sector is also facing potential disruptions. Companies like Best Buy have already signaled that the tariffs will force them to raise prices, with CEO Corie Barry acknowledging that the additional costs will likely be passed on to customers.

Rising costs and shifting consumer habits

A recent Harris Poll found that nearly two-thirds (69 percent) of Americans expect tariffs to lead to higher prices. In response, many consumers are already taking steps to adapt to the potential economic fallout, with 44 percent planning to make purchases ahead of the expected tariff implementation to avoid higher costs. This trend is particularly strong among younger Americans and people of color, who are more likely to feel the financial strain.

Additionally, a University of Chicago survey revealed that over 90 percent of economists agree that consumers bear "a substantial portion" of the cost of import tariffs. When asked if tariffs result in higher prices for consumers in the country imposing them, 98 percent of respondents either "strongly agreed" or "agreed."

Howard Lutnick, CEO of Cantor Fitzgerald and a key supporter of Trump's campaign, will oversee the president's tariff plans as commerce secretary. While acknowledging that tariffs can be a powerful tool for negotiating trade deals, he also emphasized the risk of higher prices for consumers.

"When you're running for office, you make broad statements so people understand you. Tariffs are an amazing tool for the president to use," Lutnick said in an October interview with CNBC.

Manufacturers adjusting to uncertainty

Manufacturers are already adjusting their supply chains in anticipation of potential price hikes. Errico Auricchio, president of BelGioioso, a Wisconsin-based cheese manufacturer, expressed concern that tariffs could harm the economy. "If we want to improve the economy, more companies should be started, and more should be allowed to produce goods," he said.

Retail executives are also bracing for higher costs. Walmart CFO John David Rainey noted that "there probably will be cases where prices will go up for consumers" due to tariffs. Similarly, Lowe's CFO Brandon Sink said that tariffs "certainly would add product costs."

Beyond the increased cost for consumers, there are concerns about inflation. Experts warn that these tariffs could exacerbate inflation, already a major concern for American families. Rob Handfield, a supply chain professor at North Carolina State University, noted that while some industries may see short-term benefits, the tariffs could disrupt the entire U.S. supply chain, especially for smaller businesses that can't absorb the added costs.

The long-term economic impact could be even more significant. Mary Lovely, a senior fellow at the Peterson Institute for International Economics, cautioned that the threat of tariffs could make the U.S. an "unstable partner," in international trade in the long term. "It creates an incentive to move activity outside the United States to avoid all this uncertainty," she said.

(With input from agencies)