By Elizabeth O'Brien
Consumers braced for higher prices on Monday as some of President Donald Trump's planned tariffs were set to take effect overnight. While plenty of questions remain, you can take some steps now to prepare.
On Saturday, Trump announced the imposition of 25% tariffs against imports from Mexico and Canada and 10% on Chinese imports and Canadian energy imports. As of Monday afternoon, the duties on Mexican imports had been delayed by a month and Canadian imports had been postponed by at least 30 days.
The trade war's impact will ultimately depend on its scope, says Marko Papic, chief strategist at BCA Research. Is Trump primarily imposing tariffs as a short-term negotiating tactic or counting on them as a long-term revenue source? Will the administration expand them worldwide and if so, at what level? Another question is the extent of the measures that countries will take against the U.S. as retaliation for the tariffs.
"We still don't know what's actually going to happen," says Harmon Kong, co-founder and founding principal of Apriem Advisors.
In a social media post over the weekend, Trump said Americans may have to deal with "some pain" as the tariffs take effect.
Many consumers have already planned to cut their spending. Nearly half plan to buy less frequently if tariffs raise prices, while another 40% will switch to a cheaper brand and 50% are more likely to consider second hand or local alternatives, according to a poll by Smarty, a shopping rewards app.
Here are some moves you can make:
Stress Test Your Budget
Prices will likely rise on essentials such as gasoline and groceries. Many fresh fruits and vegetables are imported from the nation's North American neighbors, and it is going to be hard to completely avoid any price increases.
Stress test your budget to see if you can absorb some higher spending -- say inflation of 3% or even 5%, says Stephan Shipe, founder and CEO of Scholar Financial Advising. If there's no wiggle room, look for places to cut back or consider taking on gig work to supplement your income.
Estimates have put the average increase in new car prices in response to tariffs at around $3,000 to $5,000 a vehicle. Even if tariffs take full effect, this won't happen overnight. Don't rush, but if you're in the market for a new car anyway, now might be the time to buy one. The same goes for large appliances like dish washers.
Rethink Home Renovations
Now's probably not the time to buy a fixer-upper. Tariffs will increase the price of building materials in an already challenged sector. High interest rates have elevated prices for home buyers and renovators who have taken out loans, and Trump's planned mass deportations could also hike prices in a sector that depends heavily on foreign workers.
More costly building materials will also raise the price of new construction, as will increased appliance costs.
Book a Trip Abroad
The U.S. dollar remains strong in relation to other global currencies like the euro and the yen. While tariffs strengthen the dollar in the short term, it's unlikely that the dollar will go up indefinitely, Papic says. A strong dollar increases prices of U.S. exports and can hurt America's global competitiveness.
If tariffs don't put a dent in America's trade deficit, then the Trump administration could pursue policies that soften the dollar.
The dollar will probably peak in 2025, Papic says. Among other effects, a weaker dollar will increase the cost of Americans traveling abroad. That means it is a good time to take that you've been planning to Tokyo or Rome.
"You probably have another six months left of that ride," Papic says. "Book those packages right now."
Write to Elizabeth O'Brien at elizabeth.obrien@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
February 03, 2025 17:10 ET (22:10 GMT)
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