President-elect Donald Trump announced Monday he will impose tariffs on goods from Mexico, Canada and China in multiple Truth Social posts, echoing past campaign promises to tax such imports.
Trump said he will sign an executive order on Jan. 20 — his first day in office — to impose a 25% tariff on all imports from Mexico and Canada. He also pledged a 10% tariff on Chinese products “above any additional Tariffs.”
Many economists believe these proposed sweeping tariffs could cause price spikes in the U.S., with an Oct. 17 report from the Tax Policy Center indicating previously proposed tariffs had the potential to hit Midwestern and Southern states the hardest.
The proposed 25% tariff on Canada in particular could spell trouble for U.S. gas prices.
So, what could this mean for Wisconsin gas prices? Here’s what to know:
First of all, what is a tariff?
Tariffs are taxes that one country imposes on another country for imported goods, according to the Tax Foundation.
The most common kind of tariffs, according to the Council on Foreign Relations, are called “ad valorem” tariffs. These tariffs are charged as fixed percentages of the value of imports. Another type of tariffs, per the CFR, are “specific tariffs” which are charged as fixed amounts on each imported good.
Who pays for tariffs?
Importers pay tariffs to their governments, according to the CFR. Despite this, consumers often feel the majority of the financial strain from the taxes.
“Still other studies have pointed to different costs for consumers: with tariffs on their foreign competitors, domestic producers can safely raise their prices,” the CFR said. “Ultimately, consumers share the burden with importers.”
Furthermore, according to the Tax Foundation, tariffs “directly increase the cost of domestic sales by artificially increasing the price on imports.”
Americans living in poverty often are most impacted by tariffs, the CRF said, citing a July 31 report from the Peterson Institute for International Economics.
How do tariffs impact gas prices?
Patrick De Haan, head of petroleum analysis at GasBuddy, said in a post on X the proposed tariffs would have “huge impacts” on prices in the Great Lakes, Midwest and Rockies in particular, given the reliance on Canadian oil.
“You can’t simply process different oil overnight,” De Haan said. “It would take investments/years. More US supply wouldn’t help.”
De Haan told the Journal Sentinel oil refineries in the Great Lakes, including Wisconsin, primarily refine Canadian oil.
“Canadian oil for decades has been reliable and plentiful,” he said. “Also, refineries have been able to secure relatively low prices on Canadian oil over the years because of Canada’s inability to ship that oil elsewhere.”
An Oct. 30 report from the U.S. Energy Information Administration found that U.S. imports of crude oil from Canada reached a record high in July, when 4.3 million barrels were being shipped to the U.S. daily. Plus, Wisconsin itself has no crude oil production or reserves, according to the EIA.
De Haan said there is an inability for many refineries in the region “to use different types of oil”, since many have been “designed specifically” for the Canadian oil.
“If Trump does move ahead with tariffs, it would essentially boost the price of oil that these refineries are paying by 25%, which in this case today, would amount to about $15 a barrel,” he said.
How much could proposed tariffs raise Wisconsin gas prices?
De Haan said oil companies “have no ability to digest” the sort of cost increase that the tariffs would create, which would ultimately get passed on to consumers.
“That would mean about a 35 cent a gallon increase during normal times,” he said.
During summer months, prices could be even higher, De Haan said, citing more stringent gasoline standards and the work it takes to refine Canadian oil. “There could be anywhere from a potential impact of 35 to 75 cents a gallon,” De Haan said.
At the end of February, Wisconsin and the Midwest begin an incremental switch to a lower-butane summer-blend gasoline— a process that generally causes prices to rise.
How long could it take for gas prices in Wisconsin to go up?
De Haan said impacts would be seen “very quick.”
“If this is something that President Trump signed on his first day in office, theoretically, within 48 hours, motorists would likely start seeing a much higher price, because refineries would be paying a much higher price to buy Canadian oil,” he said.
Claire Reid contributed to this report.
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