President-elect Donald Trump says on his first day in office he would impose 25% tariffs on all imports from Canada and Mexico and 10% tariffs on goods from China until those countries stop the flow of illegal drugs and migrants into the U.S. (Getty photo illustration by Olivier Le Moal)

President-elect Donald Trump’s announcement Monday that he would impose harsh tariffs on the United States’ closest trading partners will work against his pledge to bring down consumer prices, Democrats in Congress and economists are warning.

In a pair of posts to his social media platform, Truth Social, on Monday evening, Trump said on his first day in office he would impose 25% tariffs on all imports from Canada and Mexico and 10% tariffs on goods from China until those countries stopped the flow of illegal drugs and migrants into the U.S.

“Thousands of people are pouring through Mexico and Canada, bringing Crime and Drugs at levels never seen before,” Trump wrote. “On January 20th, as one of my many first Executive Orders, I will sign all necessary documents to charge Mexico and Canada a 25% Tariff on ALL products coming into the United States, and its ridiculous Open Borders. This Tariff will remain in effect until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop this Invasion of our Country!”

While Trump has not always followed through on threats of stiff tariffs — generating doubts about how severe the next round will actually be — the executive branch does have wide latitude to impose the taxes on foreign goods without congressional approval, meaning it is likely Trump will act in some way.

“We are going to get several tariff threats via rage-posts over the next four years,” Brendan Duke, a senior director for economic policy at the liberal Center for American Progress, said in an interview. “Unclear what exact levels on what exact countries he is going to pursue.”

What about inflation?

Tariffs are consistent with Trump’s preference for a protectionist trade policy, but may actively hurt in an area that was key to his election win over Democratic Vice President Kamala Harris this month: taming inflation.

An analysis from the Center for American Progress said the tariffs Trump announced Monday would raise annual costs for the average U.S. family by $1,300.

Democratic members of the U.S. House Ways and Means Committee, which oversees tax and trade policy, estimated tariffs favored by Trump would increase consumer costs by up to $4,000 per year.

According to CBS News exit polling, 78% of voters said inflation was a moderate or severe hardship. Trump won voters who rated the economy as bad by 40 points over Harris.

Cars, ag and energy to be hardest-hit

About 15% of goods consumed in the United States are imported, Gary Hufbauer, a nonresident senior fellow at the Peterson Institute for International Economics, an economics research center, said.

Adding across-the-board tariffs on those imports would contribute to consumers’ overall cost of living, even without considering related economic consequences.

“You’ve added to inflation, and that’s assuming that U.S. producers of similar products don’t jack up their prices,” he said. “But experience shows that if the economy is strong, they’ll do just that.”

The U.S. automotive sector, which is heavily integrated with Mexico and Canada with parts of a single vehicle produced in all three countries, could see “pretty startling” price increases, Hufbauer said.

Additionally, the U.S. imports Mexican fruits and vegetables and Canadian oil, complicating Trump’s campaign promise to bring down prices specifically of groceries and gas, Duke said.

“Americans have obviously been frustrated with the cost of food and the cost of gas,” he said. “Some parts of the United States are heavily reliant on Canadian oil, even though we’re a net exporter … So, one would expect price increases, especially in places like the Midwest that are heavily dependent on Canadian oil.”

Tariffs on Chinese goods would increase the costs of electronics, clothing and other consumer goods, Duke said.

Democratic legislation

Ways and Means Democrats, led by Washington’s Suzan DelBene and Virginia’s Don Beyer, and also joined by Earl Blumenauer of Oregon, Terri Sewell of Alabama, Steven Horsford of Nevada, Dan Kildee of Michigan and four others, introduced a bill Tuesday to rein in the executive’s ability to implement tariffs, citing the added cost to American families.

“The American people have clearly and consistently said that costs are one of their top concerns,” DelBene said in a statement. “Imposing sweeping tariffs on imported goods would raise prices on consumer products by thousands of dollars a year according to estimates. Not only would widespread tariffs drive up costs at home and likely send our economy into recession, but they would damage our trade relationships with allies and likely lead to significant retaliation, hurting American workers, farmers, and businesses.”

Trump’s promises of dramatic tariffs go beyond the intent of the law that gave the president the power to enact tariffs, the Democrats said. Congress wanted a president to be able to quickly impose tariffs on hostile foreign countries, but did not intend “to allow a president to indiscriminately impose tariffs without Congress’ approval.”

Tariffs can be an important tool for conducting foreign policy, but the range Trump is proposing is 10 to 20 times beyond what even he did in his first term, Duke said.

He cautioned that the final form of new tariffs may not be exactly what Trump proposed Monday night, though they could be similar.

“He’s gonna do something on tariffs. I don’t know what. It’s probably not these exact levels on these exact countries,” he said. “But it rhymes with it.”

Inflation is cooling off but the price of housing among other essential items remains high. (Photo by Spencer Platt/Getty Images)

Inflation hit a three-year low last month, just as the presidential election is heating up.

But the high cost of housing and other necessities will keep the economy central to both of the major campaigns, as seen this week in the first debate between Kamala Harris and Donald Trump.

The Consumer Price Index, a measure of inflation, rose 2.5% in the past year, which is the smallest jump since February 2021, according to the latest Bureau of Labor Statistics data released Wednesday. The main driver of this increase was shelter, which moved up 0.5% in August. Airline fares, car insurance, education, and apparel also rose that month. But wages also rose 0.4% in August and 3.8% over the past year, and the average workweek increased by 0.1 hour — welcome news for workers trying to keep up with the cost of living.

Voters continue to say the economy is key in deciding who should be president, at 81%, and four in 10 say the economy and inflation are the most important issues guiding that  decision.

Trump, the former president and Republican nominee, blamed the Biden administration for high prices early on Tuesday’s debate in Philadelphia, falsely claiming the post-pandemic wave of inflation is the worst ever.

“We’ve had a terrible economy because inflation, which is really known as a country buster, it breaks up countries, we have inflation like very few people have ever seen before, probably the worst in our nation’s history,” Trump said.

The worst inflation rate in U.S. history was actually in 1980, at 14%. The current wave – the highest inflation spike since then – peaked at 9.1% in June 2022.

Democratic nominee andVice President Harris responded to Tuesday’s question about the economy by touting tax cut proposals to combat housing costs.

“The cost of housing is far too expensive for far too many people. We know that young families need support to raise their children and I intend on extending a tax cut for those families of $6,000, which is the largest child tax credit that we have given in a long time so that those young families can afford to buy a crib, buy a car seat, buy clothes for their children,” she said.

Harris also pitched a proposal for a $50,000 tax deduction for small startup businesses.

Taylor St. Germain, an economist at ITR Economics, a nonpartisan economic research and consulting firm based in New Hampshire, said the latest data shows inflation is slowing enough to suggest it’s time for the Federal Reserve to start cutting interest rates.

“It’s encouraging to see that inflation is slowing and slowing to these much lower levels,” said St. Germain said. “However, it is, of course, still elevated and one of the reasons it’s still elevated is that shelter costs are driving a significant portion of that inflation, with rents rising as well, especially as we looked at this latest CPI report.”

The Fed began raising interest rates in March 2022 to bring down inflation, raising interest rates 11 times, and made its last rate hike in July of last year.

Economists are watching closely to see if the Fed cuts rates during its meeting next week, which is expected to have an impact on the housing market and other costs.

Kitty Richards, senior strategic advisor at Groundwork Collaborative, a progressive think tank based in Washington, D.C., said the Fed’s decisions are contributing to housing costs.

“The problem with housing is fundamentally a supply problem. And the Fed’s actions are actually making that supply problem worse by locking up the housing market and making it more expensive to buy, build or rehab housing,” she said. “Housing is such a big part of people’s experience of the economy and it really matters to folks when they might want to move and look around and they can’t. They can’t even afford to buy a house that is the same price as the house they live in because the interest rates are so high.”

This story has been updated to correct Kitty Richards’ title. She is senior strategic advisor at Groundwork Collaborative.

Charging stations for electric vehicles are essential for cleaning up the transportation sector. A new study by MIT researchers suggests they’re good for business, too.

The study found that, in California, opening a charging station boosted annual spending at each nearby business by an average of about $1,500 in 2019 and about $400 between January 2021 and June 2023. The spending bump amounts to thousands of extra dollars annually for nearby businesses, with the increase particularly pronounced for businesses in underresourced areas.

The study’s authors hope the research paints a more holistic picture of the benefits of EV charging stations, beyond environmental factors.

“These increases are equal to a significant chunk of the cost of installing an EV charger, and I hope this study sheds light on these economic benefits,” says lead author Yunhan Zheng MCP ’21, SM ’21, PhD ’24, a postdoc at the Singapore-MIT Alliance for Research and Technology (SMART). “The findings could also diversify the income stream for charger providers and site hosts, and lead to more informed business models for EV charging stations.”

Zheng’s co-authors on the paper, which was published today in Nature Communications, are David Keith, a senior lecturer at the MIT Sloan School of Management; Jinhua Zhao, an MIT professor of cities and transportation; and alumni Shenhao Wang MCP ’17, SM ’17, PhD ’20 and Mi Diao MCP ’06, PhD ’10.

Understanding the EV effect

Increasing the number of electric vehicle charging stations is seen as a key prerequisite for the transition to a cleaner, electrified transportation sector. As such, the 2021 U.S. Infrastructure Investment and Jobs Act committed $7.5 billion to build a national network of public electric vehicle chargers across the U.S.

But a large amount of private investment will also be needed to make charging stations ubiquitous.

“The U.S. is investing a lot in EV chargers and really encouraging EV adoption, but many EV charging providers can’t make enough money at this stage, and getting to profitability is a major challenge,” Zheng says.

EV advocates have long argued that the presence of charging stations brings economic benefits to surrounding communities, but Zheng says previous studies on their impact relied on surveys or were small-scale. Her team of collaborators wanted to make advocates’ claims more empirical.

For their study, the researchers collected data from over 4,000 charging stations in California and 140,000 businesses, relying on anonymized credit and debit card transactions to measure changes in consumer spending. The researchers used data from 2019 through June of 2023, skipping the year 2020 to minimize the impact of the pandemic.

To judge whether charging stations caused customer spending increases, the researchers compared data from businesses within 500 meters of new charging stations before and after their installation. They also analyzed transactions from similar businesses in the same time frame that weren’t near charging stations.

Supercharging nearby businesses

The researchers found that installing a charging station boosted annual spending at nearby establishments by an average of 1.4 percent in 2019 and 0.8 percent from January 2021 to June 2023.

While that might sound like a small amount per business, it amounts to thousands of dollars in overall consumer spending increases. Specifically, those percentages translate to almost $23,000 in cumulative spending increases in 2019 and about $3,400 per year from 2021 through June 2023.

Zheng says the decline in spending increases over the two time periods might be due to a saturation of EV chargers, leading to lower utilization, as well as an overall decrease in spending per business after the Covid-19 pandemic and a reduced number of businesses served by each EV charging station in the second period. Despite this decline, the annual impact of a charging station on all its surrounding businesses would still cover approximately 11.2 percent of the average infrastructure and installation cost of a standard charging station.

Through both time frames, the spending increases were highest for businesses within about a football field’s distance from the new stations. They were also significant for businesses in disadvantaged and low-income areas, as designated by California and the Justice40 Initiative.

“The positive impacts of EV charging stations on businesses are not constrained solely to some high-income neighborhoods,” Wang says. “It highlights the importance for policymakers to develop EV charging stations in marginalized areas, because they not only foster a cleaner environment, but also serve as a catalyst for enhancing economic vitality.”

Zheng believes the findings hold a lesson for charging station developers seeking to improve the profitability of their projects.

“The joint gas station and convenience store business model could also be adopted to EV charging stations,” Zheng says. “Traditionally, many gas stations are affiliated with retail store chains, which enables owners to both sell fuel and attract customers to diversify their revenue stream. EV charging providers could consider a similar approach to internalize the positive impact of EV charging stations.”

Zheng also says the findings could support the creation of new funding models for charging stations, such as multiple businesses sharing the costs of construction so they can all benefit from the added spending.

Those changes could accelerate the creation of charging networks, but Zheng cautions that further research is needed to understand how much the study’s findings can be extrapolated to other areas. She encourages other researchers to study the economic effects of charging stations and hopes future research includes states beyond California and even other countries.

“A huge number of studies have focused on retail sales effects from traditional transportation infrastructure, such as rail and subway stations, bus stops, and street configurations,” Zhao says. “This research provides evidence for an important, emerging piece of transportation infrastructure and shows a consistently positive effect on local businesses, paving the way for future research in this area.”

The research was supported, in part, by the Singapore-MIT Alliance for Research and Technology (SMART) and the Singapore National Research Foundation. Diao was partially supported by the Natural Science Foundation of Shanghai and the Fundamental Research Funds for the Central Universities of China.