well Mexico and the United States earlier today reached a one-month agreement to Stave off president Trump's proposed tariffs and looming trade War the 25% tariff on Mexico was set to go into effect Tuesday the threat of it alone sent stocks tumbling this morning president Trump on Saturday signed 25% trade penalties against Mexico and Canada along with a 10% tariff on goods from China the other two are still in place for now Trump has repeatedly said tariffs would incentivize those countries to clamp down on the flow of migrants and fenel traveling from their borders into the US under the new agreement with Mexico the country did agree to reinforce its northern border with 10,000 members of the National Guard to prevent drug trafficking but economists say Americans should brace for the impact of the other tariffs the president admitted on social media this weekend his decision could cause quote some pain but what exactly will that look like for consumers Peru Jane is an economics professor at Rutter's business school and helps explain thanks so much for Lending your Insight on this first and foremost how do tariffs work I mean the president has said it won't increase costs for American consumers but is that true how do these in practice actually work not at all actually they're going to raas the cost uh for producers who will be paying the Tariff and in most instances the Tariff is passed on directly to the consumer wherever possible so some producers May absorb the price increase but others are will just go ahead and pass it along and not only that it's also an excuse for other producers domestic producers to raise their prices as well so we're talking about a rather messy situation in which the consumer is definitely going to be subject to much higher prices than what we've seen before what types of products might we see the prices increase uh and I'm thinking of course Mexico Canada Canada and China are big trade partners with the US yes in fact they're the major trade partners and what we're going to see is definitely incre Rising prices for produce and although as you mentioned Mexican uh T tariffs have been delayed by a month but that's just postponing the Day of Reckoning and in fact you know a lot of of the products that are coming from Mexico such as you know from anything from avocados to other produce to cars autop Parts Etc they're all going to go up in price and with respect to Canada you know although it's supposed to be 10% for crude oil uh you know a lot of the production processes are dependent on Canadian Oil so consequently we can expect to see at least 25 cent increase at the gas pump from this alone and with respect to other products yes housing costs are going to go up Lumber costs you know so a lot of different products uh product lines are going to be quite severely affected and uh obviously we don't know all of the answers yet because we don't know the extent of retaliation although Canada has said that they will uh have retaliatory tariffs so we're talking about uh considerable bigger impact and it could uh definitely it's going to shrink world trade as a consequence if if the tariffs are expected as expected if they're imposed on Europe as well I mean but does the president have a point when he says the US has uh been getting ripped off we have a trade deficit uh in Goods of over a trillion dollars we haven't been making good deals does he have a point there I don't think so because of the simple reason that uh you know you and I we buy our products you know where we think uh you know what products we like so it's kind of like free trade and so are they really ripping us off or they're supplying us consumers with cheaper products that we like and so as a result of which you know they're ready to finance the trade deficit because the dollar is in fact the reserve currency and they're happy to accumulate those dollars so the question is that you know this is like a uh a loan of sorts to us consumers at different points of time and hence uh the question of getting ripped off doesn't really exist in our vocabulary and in fact you know all economists do in fact prefer free and unfettered trade now there are some other issues that you know the Trump Administration wants to address they want to increase manufacturing activity or local production and so the perception is that if they see higher price if we see higher prices for imported goods we start switching over to domestic products but as I said there's going to be a price increase even for domestic products because typically we have seen that uh domestic producers raise their price right alongside foreign um in foreign supplies you know so Pearl uh in a financial sense how much would this cost the average household the average household is going to get really hit because you know the cost of uh products it's going to affect us by about $1,000 per year perhaps even more and of course you know imported cars are going to cost upwards of $3,000 so we're looking at substantial uh hit to our budgets and additionally with inflation ratcheting up across for all different product lines um you know my expectation is three three and a half% rates of inflation then that is going to hit our budgets even more paru Jane is a finance and economics professor at Rutter's business school thank you than you so much for your Insight thank you [Music]