President Trump’s tariffs imposed on Canada, Mexico and China are likely to result in almost immediate price increases for produce in New York City stores, could send energy prices up, and threaten the finances of city-based companies that sell billions of dollars in goods and services to Canada.
Mexico accounts for 50% of all produce imported by the United States, including 80% of all the avocados eaten here. Canada is a key source of cherry tomatoes. And New York State imports energy from Canada, especially 4.1 terawatt-hours of low-cost hydroelectricity that powers 500,000 homes.
Meanwhile, Canada is the number one export market for New York State companies buying more than $10 billion worth of services and $9.5 billion worth of goods.
President Donald Trump on Saturday followed through on his campaign promises to impose tariffs on foreign goods with a 25% levy on imports from Canada and Mexico, the two most important trading partners for the United States. (He also imposed a 10% levy on all products from China.)
He claimed the tariffs were in response to the failure of the two countries to stop the flow of fentanyl and illegal immigrants into the U.S., allegations both neighboring nations have disputed.
Trump has said that in making these moves, his long-term object is to return manufacturing and the jobs it creates to the United States. He claims that tariffs — which are taxes on foreign goods — are paid by foreign companies. While his advisers have been insisting that price increases will be minor, Trump on Sunday acknowledged there could be “some pain.”
Most economists say tariffs are passed directly along to American consumers, and domestic manufacturers increase their prices along with their foreign competitors.
Nationally, major manufacturing industries like those that make vehicles are predicting massive price hikes, less production and inventory for buyers.
Locally, Trump’s tariffs are likely to hurt New York City with higher prices affecting its more than 8 million consumers with little prospect of adding manufacturing jobs.
While the city boasted 1 million manufacturing jobs at the end of World War II, that number had slipped below 300,000 by 1990. Today there are only 57,000 factory jobs in the city, or 1.2%, of the 4.7 million total jobs. There are virtually no available land to locate factories even if they could afford the city’s high taxes, land prices and labor costs.
“We haven’t lost manufacturing jobs to China. We haven’t had a durable goods manufacturing sector in decades,” Lauren Melodia, the top economist at the Center for New York City at the New School told THE CITY in November. “It will show up as higher prices for people here.”
But the biggest threat would be a trade war that jeopardizes the ability of U.S. service firms to operate abroad, from Wall Street to professional services like accounting and consulting businesses. New York State financial and business services firms generate $6 billion a year from their activities in Canada, according to government trade data
Tourism could be affected as well since about 1 million Canadians visit New York City annually, only a few less than first-ranked Great Britain. (Approximately 65 million people visited the city last year, according to the mayor and tourism officials.) Some economists predict Canada’s economy could shrink by a whopping 3% as a result of the tariffs, which would likely mean fewer Canadians could afford travel.
The creation of new housing could be affected disproportionately.
Canadian lumber accounts for 30% of all the softwood used in the U.S. and is crucial for housing construction. Tariffs on steel could also raise the cost of that key ingredient in building new homes.
Another Trump policy, increased deportations, would rattle that industry. Increased costs made worse by the risks to undocumented workers “could further increase the already astronomical cost of housing construction, further worsening New York City’s housing supply shortage,” city comptroller Brad Lander said in a November report on the risks Trump policies posed to the city.
Trump, worried about the political impact of a surge in gas prices, levied only a 10% increase on Canadian energy exports to the U.S. But the risk to New York, especially upstate, lies in its reliance on cheap hydro power from Ontario. It isn’t clear if the 10% energy tariff applies to hydro power, but even if it doesn’t Canadian Prime Minister Justin Trudeau said Saturday he was considering export fees that would raise the cost to New York consumers.
An all-out trade war could also imperil a crucial project designed to increase clean energy in New York. The state is part of a consortium building a $6 billion transmission line from Quebec to Astoria, which would bring another 7.6 terawatt-hours of electricity to the state, which could save consumers $10 billion over a decade.
The impact on local businesses depends on the extent of counter-tariffs by Canada. (Mexico also promised counter actions, but hasn’t specified what they are.) The state’s largest exports to Canada are gems and jewelry, most of them processed in the city after being imported from abroad, according to government trade data. They are followed by paper, optical instruments, plastics and perfumes.
For now, Trudeau said the 25% tariff imposed on U.S. exports are focused on products made in states with Republican senators: orange juice from Florida, whiskey from Tennessee and peanut butter from Kentucky.
The Canadian prime minister also said other products likely to be hit include beer, wine, vegetables, perfume, clothing, shoes, household appliances, furniture and sports equipment, and materials like lumber and plastics.
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