How could Trump's proposed tariffs affect gas prices in Wisconsin?

President-elect Donald Trump announced in multiple Truth Social posts Monday that he would impose tariffs on goods from Mexico, Canada and China, repeating previous campaign promises to tax such imports.

Trump said he would 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 promised a 10% tariff on Chinese products “above and beyond any additional tariffs.”

Many economists believe these proposed sweeping tariffs could lead to price spikes in the United States. An Oct. 17 report from the Tax Policy Center suggests that previously proposed tariffs had the potential to hit Midwestern and Southern states hardest.

In particular, Canada’s proposed 25 percent tariff could cause problems for U.S. gas prices.

So what could this mean for gas prices in Wisconsin? Here’s what you should know:

What is a tariff?

According to the Tax Foundation, tariffs are taxes that one country imposes on another country on imported goods.

According to the Council on Foreign Relations, the most commonly used tariffs are called “ad valorem” tariffs. These tariffs are levied as fixed percentages of the import value. Another type of tariff, according to the CFR, is “specific tariffs,” which are levied as fixed amounts on each imported good.

Who pays the tariffs?

According to the CFR, importers pay tariffs to their governments. Still, consumers often feel the brunt of the financial burden of 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.”

Additionally, according to the Tax Foundation, tariffs “directly increase the cost of domestic sales by artificially increasing the price of imports.”

Americans living in poverty are often the hardest hit by tariffs, the CRF said, citing a July 31 report from the Peterson Institute for International Economics.

How do tariffs affect gas prices?

Patrick De Haan, head of petroleum analysis at GasBuddy, said in a post

“You can’t just process a different oil overnight,” De Haan said. “It would require investment/years. More US supplies wouldn’t help.”

De Haan told the Journal Sentinel that oil refineries in the Great Lakes, including Wisconsin, primarily refine Canadian oil.

“Canadian oil has been reliable and abundant for decades,” he said. “Furthermore, refiners have been able to secure relatively low prices for Canadian oil over the years due to Canada’s inability to ship that oil elsewhere.”

An Oct. 30 report from the U.S. Energy Information Administration found that U.S. crude oil imports from Canada hit a record high in July, when 4.3 million barrels were shipped to the U.S. daily. Additionally, Wisconsin itself has no crude oil production or reserves, according to the EIA.

De Haan said many refineries in the region are unable to “use different types of oil” because many are “specifically designed” for Canadian oil.

“If Trump actually imposes the tariffs, that would essentially increase the price of oil that these refiners pay by 25%, which in this case would be about $15 a barrel today,” he said.

How much could the proposed tariffs increase gas prices in Wisconsin?

De Haan said oil companies were “unable to digest the cost increases” resulting from tariffs, which would ultimately be passed on to consumers.

“That would represent an increase of about 35 cents per gallon in normal times,” he said.

Prices could be even higher in the summer months, De Haan said, citing stricter gasoline standards and the effort involved in refining Canadian oil. “The potential impact could be between 35 and 75 cents per gallon,” De Haan said.

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