New England consumers, businesses dodge a bullet as Trump puts tariffs on hold
By Larry Edelman, Boston Globe
It wasn’t just Mexico and Canada that earned temporary reprieves from steep tariffs President Trump planned to impose on their exports Tuesday. New England consumers and businesses also caught a break.
From groceries to gasoline, from home construction to new cars, Trump’s tariffs would have boosted the already-high cost of living in the region. Businesses faced a hit to profits from disrupted supply chains, increased component prices, and retaliatory tariffs on their own exports.
In a pair of last-minute agreements, the leaders of Canada and Mexico — America’s top two trading partners — on Monday said they would step up efforts to stop the flow of migrants and illegal drugs at their borders with the United States. Trump said he would delay the tariffs he announced over the weekend — 25 percent on all goods, with the exception of a 10 percent rate on Canadian energy products — for 30 days while the countries work to implement the changes.
A new 10 percent tariff on goods from China was still set to go into effect at midnight, The New York Times reported, citing White House officials.
The rapid-fire developments followed a weekend of warnings from local business leaders and politicians about the grave damage the tariffs would do to the New England economy.
“The tariffs against China, Canada, and Mexico — three key trade partners for the New England region — will undoubtedly have widespread economic impact in our region,“ said James T. Brett, chief executive of the New England Council, a business group.
Governor Maura Healey put it more bluntly: “This will harm American families, stifle economic growth, and cost jobs.”
Trump is attempting to deliver on multiple campaign promises by ending decades of free-trade policies that he argues devastated American workers and communities reliant on domestic manufacturing.
He entered office two weeks ago vowing to coerce Mexico, Canada, and China into taking stronger measures to block migrants and fentanyl from pouring into the United States; encourage US companies to produce more goods domestically; shrink the nation’s trade deficit; and protect vital industries from foreign competition.
But the strategy carries significant risks, economists say, including rising consumer prices, retaliatory tariffs on US exports, and higher interest rates.
While everyone took a big breath of relief on Monday, there’s no guarantee Trump won’t go back at Mexico and Canada down the road.
Energy
The biggest impacts on many New Englanders would be felt in heating costs, particularly among those who use oil or propane. Roughly one quarter of Massachusetts households use petroleum products for their heat. Many heating oil distributors in the region get their heating oil from Irving Oil, which refines the fuel at its giant refinery in Saint John, New Brunswick.
Charlie Uglietto, president of Cubby Oil & Energy in Wilmington, said it was too early to know the impact a tariff on imported oil would have on the wholesale heating oil market.
“We don’t want higher prices for our customers, particularly in the midst of a very cold winter,” he said.
New England imports some electricity from Canada, primarily from hydroelectric facilities in Quebec, but the impact of the tariffs on electricity prices would be much more muted.
For residential and small business customers who get basic service from Eversource and National Grid, those prices are locked in via previously announced contracts from now until the end of July. Roughly half of the state’s residential customers get their electric supplies through a municipal aggregation contract, and prices in those programs tend to be locked in for more than a year.
Eversource spokesman William Hinkle noted that natural gas heating prices for residents and small businesses are also locked in for a six-month period that ends on April 30, though regulatory rules require price adjustments if the supply cost fluctuates by more than 5 percent.
Homebuilding
Homebuilders and developers said Monday the tariffs would almost certainly drive up the cost of housing in Massachusetts, by effectively taxing the import of some of the materials most integral to housing construction.
David O’Sullivan, president of the Homebuilders and Remodelers Association of Massachusetts, said one of the most significant concerns is Canadian softwood lumber, which is used in many single-family and multifamily developments.
Roughly 30 percent of the lumber used in the US is imported from Canada, and it is already subject to a 14.5 percent tariff. Further tariffs, said O’Sullivan, “will only serve to drive up the cost of housing construction, and that cost will be passed on to consumers who are already paying too much for housing.”
In the Northeast, architects often request Canadian softwood lumber — such as spruce, pine, or fir — because of how it survives in the climate, said Rita Ferris, president of the Northeastern Retail Lumber Association.
“We just don’t grow enough of our own to meet our own demands,” Ferris said. ”We totally get the goal of putting America first and having American workers and all of that. But if you can’t supply yourself, it’s really an extra burden.”
Massachusetts developers also source gypsum, an ingredient used in drywall, from Mexico and Canada.
Food prices
Prices at grocery stores and restaurants would likely increase as a result of the tariffs, industry officials said.
A large portion of produce sold in the United States comes from overseas. And in Massachusetts, 20 percent of families are food insecure, a number that will continue to rise as a result of heightened prices at the grocery store, said Project Bread CEO Erin McAleer.
“We are so scared of any policy that is going to increase the price of food, knowing that we are already at a crisis level,” McAleer.
Philip Frattaroli, owner of Lucia Ristorante in the North End and Cunard Tavern in East Boston, said restaurants like his will have to balance keeping their business alive with not raising menu prices too much.
“It’s a piece of our puzzle. The prices will go up, and that will fall on us,” he said.
Restaurant-goers can expect a 5 to 10 percent increase in menu prices if the tariffs are in place for an extended period of time, said Steve Clark, CEO of the Massachusetts Restaurant Association.
Autos
Robert F. O’Koniewski, executive vice president of the Massachusetts State Automobile Dealers Association, said tariffs would make cars more expensive.
“There’s no business I know of that can swallow a 25 percent hike in components and other types of overhead costs without passing something on to the consumer to soften that blow.”
But O’Koniewski said the impact won’t be felt for some time, because US car dealers have around 70 days of inventory on hand, with more pre-tariff vehicles in the pipeline.
Anticipating that Trump would enact tariffs, 66-year-old Framingham resident Jackie Lemmerhirt planned ahead. Her family stocked up on products that could now be affected by price increases — she and her husband each bought Toyota RAV4 cars, and her daughter bought a Jeep Cherokee. She also bought a Whirlpool dryer for nearly $600.
Now, she’s more worried about whether the tariffs will deliver a pounding to Wall Street — and, by extension, her retirement savings. She said she’s considering taking some money out of her 401(k) account, just to have it on hand in case the market really goes south.
“The last four years, they’ve been doing great,” she said of her and her husband’s retirement accounts. “I haven’t looked this afternoon, but this morning, it wasn’t looking too good, and I hope that they don’t really take a nosedive.”