On Saturday, recently re-inaugurated U.S president Donald Trump signed an executive order instituting sweeping tariffs on goods brought into the United States from our three biggest trading partners: Canada, Mexico and China, with the three combined resulting in over 40% of the United States' total imports in 2024. Then, on Monday, he swiftly delayed those tariffs to Canada and Mexico after "negotiating deals" for both countries to provide greater protection at their respective borders to the U.S (despite these both being deals the Biden administration hammered out months ago).

These tariffs, a major campaign promise during Trump's successful bid to the White House, are being brandished by Trump as a unilateral presidential power to "ensure Americans' safety" by using the United States' prominent economic position to pressure other countries into adhering to rules and regulations set by the new administration.
This, of course, comes with risks, particularly around the bugbear topic that is inflation. Don't believe me? Check out the reaction of the stock market on the first trading day after the tariffs were enacted (though they staged an unbelievable turnaround after the Mexico concession, and opened higher on Tuesday following the subsequent delay of the Canadian tariffs). So today, let's chat about tariffs and how they can (and will) affect your ability to travel in the near future.
What Are Tariffs?
Let's start by assuming nothing. Let's say you've rolled out of a five-year coma (Luka's a Laker, by the way) and Trump is still in the White House, but this time he seems older and more hell-bent on an American "restoration" project. He also keeps repeating the word "tariffs" into a microphone at any opportunity, especially as he dominated coverage for the first two weeks he was in office.
So what exactly are tariffs? Tariffs are a tax brought upon the imports into a country. That's it. Simple.
So let's say a shipment of Canadian lumber 2x4's are being brought into the United States, and it costs $100. Under the new 25% tariff the United States has brought against Canadian goods, that $100 shipment now costs $125, of which the $25 is paid to the United States government as a tax payment. But who pays the tax?
Despite arguments from President Trump's voter base, the tariff is not paid by the country of origin. The tariff is paid by the importer.
Let's go back to our 2x4's. Let's say that the Home Depot brings in 10 shipments per week of $100 worth of Canadian lumber to keep their stores stocked. That $1,000 they're spending per week now costs them $1,250, due to the tariffs levied against Canadian goods being brought into the United States. Home Depot now has four options on their hands:
Eat the cost and continue shipments as normal,
Reduce the number of shipments, reducing inventory and potential business,
Pass the 25% cost on to the consumer by raising prices but maintaining the same margin,
Buy American-based lumber, circumventing the entire process
Time to analyze these options to see which our friends in the orange aprons might most logically take.
Option 1: Eat the cost and maintain
The first option is to just take the cost on as a company and maintain your business. In effect, Home Depot would be gambling that their business volume would remain the same, but they would be reducing their margins, and therefore their operating profit, by 25%. This means that, in order to maintain shareholder value, they would have to find cost cutting across the organization to balance the budget. This could mean layoffs, store closures, or some sort of technological advancement that would reduce costs elsewhere to balance the books.
Option 2: Reduce the number of shipments
Home Depot could also look to reduce the total number of shipments they order commensurate to the amount of the tariff. This would allow Home Depot to maintain their cash flows on the buy-side, but reduce the business potential they could otherwise see by maintaining their standard level of inventory. This could again lead to lower revenues, downward pressure on their stock price, and again, cost cutting.
Option 3: Pass the 25% cost on to the consumer
Now we're getting to it. Let's say that the Home Depot wants to maintain their business, their store count and the number of employees, and they don't really feel like taking one on the chin. What do they do? They hike the price of 2x4's by 25% to offset the cost of the import tariff! This means that the cost of the good is directly passed on to the consumer. In economics, this is called "inflation," and it's diametrically opposed to the platform Trump ran on to get back to the White House.
We are already seeing this reaction from corporate America. The CEO's of WalMart, AutoZone and Columbia Sportswear have already publicly stated that they will pass the cost of tariffs on to the consumer immediately.
Option 4: Buy American
Finally, we have the main argument used by Trump's base: just buy American. You can avoid this whole tariff mess if you check the label and see a little American flag on it. That way, you don't have to worry about shipping, import tariffs or interacting with our neighbors to the north, and all of that is totally fair. But what about if the U.S physically cannot produce what is needed? "The U.S is the greatest country in the world! We can bring jobs back, build anything here and we can produce what we need" I hear you yell. Well...no, not really.
There's a reason I used lumber in my example here (though I apologize to the Home Depot for the stray bullet): Canada is one of the world's largest producers of softwood lumber, and the United States is one of the world's largest buyers of the stuff. According to NC State's College of Natural Resources, the U.S imported 28.1 million cubic meters of softwood lumber from Canada in 2023, primarily for building residential real estate (and we can't even cover the effect of tariffs on the American housing market here - that's a whole different issue entirely). And there's a reason for this - the United States physically cannot grow enough trees to satisfy our own needs, so we have to bring it in from somewhere else.
This also extends to other products that are getting caught up in the tariffs - from fruits, veggies and beer in Mexico to crude oil, lumber and steel in Canada, and even most of the products you find under your Christmas tree from China, life is about to get far more expensive for the U.S consumer. According to an analyst from TD Bank, even something like the price of the average U.S car (due to the number of times it has to cross borders to be constructed, collecting tariffs at each stop) could increase by $3,000 directly due to these tariffs.
But Why Is Trump Using Tariffs?
On the campaign trail, then-candidate Trump would often cite a strange reverence of former U.S president William McKinley. Even during his inaugural address, Trump made a specific point to name McKinley (as well as bring up the bizarre decision to rename a mountain after him) as someone who "made our country very rich through tariffs and through talent." But what did McKinley actually do?
William McKinley's Tariff Strategy
Trump's vision of McKinley, curiously, seems to be incomplete. McKinley was president of the United States from 1897-1901, overseeing a period of pretty rapid growth for the U.S economy. However, it would be inaccurate to say that tariffs were the reason why.
According to the Washington Post's interview with Douglas Irwin, economics professor at Dartmouth College, it was a wide variety of other factors that really pumped the economy into overdrive:
Increasing amounts of loanable funds held by U.S banks
A huge increase in infrastructure spending that stimulated job growth and construction (seems oddly reminiscent of Biden-era policies)
Mass immigration to the United States (ironic) that resulted in cheap labor
Technological advancements, with the Post specifically citing the advent of the telephone
When tariffs were instituted by the McKinley administration, they were just kind of...there. They really weren't the impetus for the growth - actually, quite the opposite. Tariffs were extremely unpopular, leading to rapid inflation for the U.S consumer, and they inadvertently led to the beginning of the Spanish-American War. Pre-McKinley, the topic of tariffs led to a landslide win for opposition party Grover Cleveland in 1892.
However, despite Trump drawing comparisons between himself and McKinley, there are some stark differences.
The Carrot and the Stick
McKinley outlined in a speech in 1901 that he had come around on the idea that the United States needs to get more involved in the global economy. "What we produce beyond our domestic consumption must have a vent abroad," he said in a speech shortly before his assassination.
Trump has taken a decidedly different approach of American isolationism, determining that the United States can make what we need (see above: wrong) and leverage anyone we need to to get what we don't have. I really like the comparison made by McKinley biographer Robert Merry that McKinley used tariffs as a carrot, while Trump uses them as a stick.
And boy is that some stick. Trump in the last two weeks has already threatened, then backed off, tariffs against Colombia due to immigration policies he didn't like. He also backed away from the Mexican tariffs on Monday, citing Mexican President Sheinbaum's decision to send troops to the U.S-Mexico border to stem the flow of fentanyl into the country.
But this still begs the question: assuming Trump continues to use his stick against our biggest trading partners, how will that affect your wallet?
How Will Tariffs Affect Travel?
Now we're getting to it. You want to know directly "how is this going to affect me?" Well, it's going to be pretty serious. Here's why.
Remember the Home Depot example from earlier and we chatted about the 2x4's? Well, the most logical, popular (with companies) and capitalist option is to raise the prices of the product in order to offset the cost and maintain the margin in order to continue the upward march of stock prices. The travel industry is no different.
Think about a domestic trip you'd take from Atlanta to Indianapolis. You'll start by driving to the airport, hopping in a plane, landing in Indy, grabbing a rental car and heading to your hotel. You'll stay for a few days, grabbing dinner out each night, maybe hitting the golf course, before heading back home.
Think about how many touchpoints you have on that trip. You'll get to the airport and maybe grab some food at the airport Chili's. If you get anything that includes different types of beans, avocados or a beer, you'll more than likely be hit by the tariff against Mexico. The plane you're on? Though assembled in the U.S with Boeing, the parts (carpets, seat cushions, aluminum, steel, electronics, in-flight entertainment screens) mostly come from China, again hit by tariffs. You get to your hotel and, though it's an American hotel run by an American company like Marriott or IHG, it's built with lumber from Canada (25%), carpeting and bedding from China (10%) and again, spirits and beer at the hotel bar from Canada (25%) and Mexico (25%).
A fair pushback here could be along the lines of "this is all theory, but in practice we may not see that." Well, I have some bad news. In 2019, during Trump 1.0, tariffs against China were pushed above 21% for the first time, resulting in a pretty instant movement in prices (again we call that "inflation"), especially hitting the hospitality industry.
Almost immediately, it became more expensive to travel as the tariffs against Chinese-originated goods came into effect, reducing the effective purchasing power of the everyday American consumer. Travel costs for the consumer rose 5.9% that year, which might not sound like a huge amount, but consider this - the annual inflation rate in 2019 was 1.81%, meaning travel-specific inflation was 3x the average. And that was just a slight increase on the already established tariffs we had with China. Think about what adding another 10% can do...
Conclusion
Tariffs, as we've outlined here, can be extremely damaging to the U.S consumer, and that's actually kind of the point. Tariffs were really made to be dissuasion tactics, with their key strength coming from protecting U.S industries and jobs by using very targeted tariffs in specific sectors as protection to reshore jobs, or keep the ones that were already here. Some tariffs can be a good thing - just ask Trump 1.0 who applied 100% tariffs to electric vehicles manufactured in China that has fully prevented Chinese-made EV's from being sold in the U.S. This tariff was so successful at protecting the American auto industry that Biden actually increased and extended it into his administration.
But blanket tariffs? That's using a hammer to do the job of a scalpel, and I'm afraid that all of us will end up paying the price.
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