Won’t somebody please think of the children? Specifically about tariffs’ effects on their parents’ pocketbooks??
The US is putting 25-per-cent tariffs on goods from Canada and Mexico starting on Tuesday, along with another 10 percentage points of tariffs on China. That news was big enough to overshadow the Trump Administration’s weekend promise to create “strategic reserve” for alt-coins. (That’s another post.)
For those of us who have only looked at economic policy after the 1930s, a tariff is a levy on goods coming into the US. If commodities are priced on the margins (they are) and if companies pass on their cost increases to customers (they mostly do), tariffs start looking like pieces of paper that says “Make Prices Higher” for everything that’s imported, or that’s made of imported goods.
That’s a lot of stuff, especially because this round of tariffs is aimed at Canada, China and Mexico:
Financial markets made it clear that investors do not love this. Stocks fell sharply, and retailers’ shares were hit, with Dollar Tree down 5.6 per cent and Dollar General off 3.1 per cent. This is presumably because the US executive branch’s Make Stuff More Expensive Plan, if it persists, will mean Americans won’t be able to buy as much stuff.
While this bodes poorly for automakers, as MainFT has covered in depth, there’s a decent chance that prices won’t rise immediately on durable goods. This is because producers seemed to use that extra month of tariff delays to rush imports of inventory and materials. As an aside, Jason Furman had a helpful explanation today about why that boost in imports is probably dragging down the Atlanta Fed’s GDPNow figure into spooky recession territory.
But for our US readers who like to eat healthy, or have children, there is a more urgent concern: Tariffs on fresh produce, like berries, which can not be ordered in bulk and held in a warehouse for months.
Kids love berries. Berries are already expensive. Most kids love strawberries. And Mexico was the source of nearly 99 per cent of imported strawberries available in the US in 2022, according to the latest data from the Census Bureau.
While the US has a pretty robust domestic strawberry-growing business, imports still made up nearly 19 per cent of available supply from 2018-2020, according to the USDA.
For all berries that aren’t strawberries, we get about 51 per cent of our imports from Mexico and Canada, according to the Census Bureau.
A whopping 62 per cent of available blueberry supply was imported in 2018-2020, according to the USDA. While blueberries are imported from a wider range of countries, roughly a third came from Mexico and Canada in 2020:
In other words, we’re talking about a 25-per-cent price increase on roughly one-fifth of available blueberries and strawberries in the US.
For vegetables — equally important for kids, if less loved — nearly 70 per cent of imports come from Canada and Mexico. (This is going by the somewhat puzzling NAICS category that excludes potatoes, sugar beets and corn, but includes melons.)
Again, fresh produce markets are fundamentally commodity markets, meaning they’re definitely priced on the margins. Because of this, it’s tough to argue the tariffs won’t matter for prices at the grocery store.
These unfriendly maths could also help explain US President Donald Trump’s decision to take another step towards agricultural autarky Monday, with this post threatening tariffs on exports of agricultural products.
But there are pretty clear problems with any US attempt to fully replace some of that supply . . . for example, the blueberry-growing seasons in Michigan or Oregon probably don’t extend through January and February, when it is summer in Peru.
To take a step back: US officials keep saying they want Americans to have more kids. If so, it could help to make it a little less expensive to do that. No need to worry about car seat requirements! It’d be fine to just avoid unnecessary berry price increases. We might be able to put chicken coops in our backyards, but growing berry bushes is a different matter altogether.
