Trump says Americans should get ready for 'a little disturbance' from tariffs

President Donald Trump said Americans should be prepared for “a little disturbance” from tariffs. 

"Tariffs are about making America rich again and making America great again, and it's happening and it will happen rather quickly,” Trump said Tuesday in his formal address before a joint session of Congress. “There will be a little disturbance. But we’re OK with that. It won’t be much.” 

The remarks came just hours after Trump imposed 25% tariffs on goods imported from Canada and Mexico and a doubling of duties on some Chinese goods to 20%, prompting quick retaliatory tariffs from China and Canada. Mexican President Claudia Sheinbaum is set to announce Mexico's retaliatory tariffs this weekend. 

The benchmark S&P 500 fell 1.2% Tuesday, wiping out the post-election gains amid concerns that Trump’s tariffs could drive up the cost of consumer goods.  

“Generally, economists would agree – and economists don't agree with anything – that tariffs are going to be inflationary,” said Ryan Sweet, chief U.S. economist at Oxford Economics. Inflation “has the potential to undermine consumer spending. How much depends on how aggressive he is with tariffs over time and how long they last.” 

The Trump administration on Wednesday reiterated plans for additional reciprocal tariffs starting April 2 but also carved out a one-month exemption for automakers "so they are not at an economic disadvantage," according to White House Press Secretary Karoline Leavitt.

What does this mean for prices?

A tariff is a tax on products brought in from another country, typically paid for by the U.S. company importing the goods. Retailers and manufacturers are expected to pass on at least some of those costs to consumers, which is why economists say tariffs can be inflationary.

A number of U.S. companies have already warned that higher prices are coming. Best Buy said prices would go up this year because Mexico and China are two of its biggest suppliers. Target has said tariffs could drive up seasonal produce costs as soon as this week.

Experts have also said there could be a hike in gas prices and home heating costs, especially in regions of the U.S. that rely on Canadian oil imports like the Northeast. Home prices are also expected to rise, with one analysis from John Burns Research and Consulting forecasting a 5% increase on newly constructed homes.

USA TODAY has reported that tariffs are expected to eventually drive prices up across the board.

Overall, Trump's tariffs on Canada, Mexico and China could cost the typical U.S. household more than $1,200 a year, according to the Peterson Institute for International Economics, a nonpartisan think tank. Another analysis by the Yale Budget Lab says tariffs could cost the average U.S. household up to $2,000 in the first year.

"When I think of tariffs, I think of the effects on real disposable income. And people’s purchasing power will go down," Sweet said.

Canada, China launch retaliatory tariffs

Canada responded Tuesday with 25% tariffs on $20.7 billion worth of U.S. imports and threatened tariffs on another $86.2 billion worth of goods if Trump doesn't lift his tariffs within 21 days. The tariffs would target American beer, wine, bourbon, appliances and Florida orange juice.

China hit back with tariffs on up to 15% of some U.S. agricultural products.

Trump has said tariffs will pressure Canada, Mexico and China to stop illegal drugs like fentanyl from entering the U.S., curb illegal immigration and prevent other countries from taking American jobs.

Additional reciprocal tariffs on nations that placed duties on U.S. exports are slated to begin next month.

"Whatever they tax us, we will tax them," Trump said during his Tuesday address. "If they do non-monetary tariffs to keep us out of their market, then we will do non-monetary barriers to keep them out of our market."

Consumers, businesses adopt a 'wait-and-see' approach

Economists told USA TODAY that policy uncertainty under Trump's second term has companies and consumers pulling back on things like hiring and spending.

"Businesses aren’t pulling back or cutting investments, but they’re taking a wait-and-see approach, and we’re starting to see that show up in the jobs numbers," Sweet said.

A report Wednesday from ADP showed private sector employers added 77,000 jobs in February, below the consensus of 140,000. The payroll provider said policy uncertainty and a slowdown in consumer spending may have led to layoffs or a hiring slowdown last month.

Meanwhile, U.S. consumer spending fell for the first time in nearly two years in January, driven by declines at furniture, clothing and electronic retailers. Consumer confidence dipped 7 points to 98.3 last month, the biggest decline since August 2021.

"The uncertainty is corrosive on the economy. It causes businesses and consumers to turn more cautious," said Moody's chief economist Mark Zandi. "Not that they run for the bunker and stop spending and investing, but they pause, go on hold, wait to see how things play out. ... They’re just turning more cautious and pausing what they do, and that makes the economy vulnerable."

How is the stock market reacting?

U.S. stocks opened slightly higher Wednesday. The S&P 500 was up 3 points at the open, the Dow Jones Industrial Average was up 13 points and the tech-heavy Nasdaq Composite was up 35 points.

Yields on U.S. government bonds have taken a hit in recent weeks as investors price in a softening economy, with the 10-year note starting the day Wednesday down nearly 40 basis points for the year.

This story has been updated to add new information.