President-elect Trump has announced that he is considering a 25% tariff on goods from Canada and Mexico. The stated goals are to reduce the flow of fentanyl and other drugs into the United States and to increase assistance with controlling illegal immigration. While these issues are important, the economic costs of such tariffs would be enormous. If levies of this magnitude are actually implemented and sustained for an extended period, The Perryman Group estimates that almost two million US jobs could be lost.

If substantial tariffs are imposed, they would have the effect of raising prices. In addition, dynamic effects would be initiated through the economy. The Perryman Group estimated the overall economic cost of the potential tariffs, accounting for changes in purchasing patterns and other responses.

If tariffs are implemented on both countries, estimated economic harms total $250.6 billion in annual gross product and almost 2.0 million jobs. The overall cost to the US economy in such a scenario would be losses of approximately 0.91% of gross product, 0.95% of earned income, about 1.27% of employment.

Clearly, imposing substantial tariffs on major trading partners is bad for all nations involved. It is crucial that agreements on key issues are reached among the North American nations without the implementation of such destructive measures.

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