President Donald Trump has threatened to impose tariffs on imports from Mexico, Canada and China – a move that economists predict will hurt American consumers as well.

WRAL News spoke with NC State economist Mike Walden to give you a breakdown of Trump's tariffs and how they could impact you. 

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Gas, fresh produce and consumer electronics are some of the top goods the U.S. imports from these countries.

Collectively, these three countries accounted for 42% of the nearly $3 trillion worth of goods the U.S. imported worldwide last year.

Walden said there are estimates that the overall inflation rate in the country could go up to anywhere from 3% to 4% on an annual basis as a result of Trump's tariffs.

So, how soon could we feel the impacts?

Walden said we may not feel the impacts immediately...for some products.

"I think a lot of producers – not a lot of retailers, like grocery stores – have been anticipating this," Walden said. "So there's some indication they have stocked up, maybe bought extra avocados, for example, from Mexico. And so you wouldn't necessarily see that impact initially. 

"For other things...it would probably appear very quickly. But this is going to impact people who buy everything from avocados to vehicles, to maybe even at the gas pump."

'It's essentially US companies that are paying that tariff'

Walden said there's a misconception that when the U.S. imposes a tariff on a country, it's the manufacturers and retailers in that country that suffer the consequences. 

"I think there is the thought, or the conception, that the Mexican company that assembled the automobiles pays a tariff. They don't," Walden said. "It's the importer. In this example, it would be the U.S. auto retailer who pays the tariff.

"[Trump] has talked about how this money could maybe offset some of the tax cuts he wants to push, but the point is that it's essentially U.S. companies that are paying that tariff."

Walden said there's a lot of economic research on this, and the conclusion right now is that in most cases, the U.S. company who has to pay that tariff is going to pass on that cost, or a large part of that cost, to the U.S. consumer.

"Everyone is getting hit here," he said. 

Walden said the other side of this is the potential for retaliation. 

"If Mexico and Canada say, 'All right U.S., you're putting a 25% tariff on things that we sell you, we're going to do that to things that you sell us.'"

So, why is Trump doing this?

NC State economist Mike Walden said Mexico and Canada are our biggest trading partners.

Walden said he believes the tariffs have to do with the auto industry.

"When the North American Free Trade Agreement was passed...it was superseded by the Mexico, Canada, U.S. agreement," Walden said. "We essentially said the three countries were going to manufacture or assemble vehicles in the lowest cost country, which is usually Mexico, and the U.S. and Canada will be making the parts, making the technology, etc. 

"That was the notion. And the idea was that consumers would benefit, because we were taking advantage of what each country could supply at the lowest cost."

Walden said Trump is trying to change that model so that the U.S. will have more control over vehicle production.

"So I think that's one thing behind this," Walden said. "Another thing supposedly behind this is that he wants Mexico and Canada to do more about stopping immigration; he wants them to do more about stopping the flow of the fentanyl. But I think mainly this has to do with the auto industry."

"I think he is very laser focused on manufacturing. So I think he is using this as one tool to try to bring the manufacturing, particularly from Mexico, back to the U.S."

Walden said, while the idea makes sense in theory, it's Americans who may end up paying the price.

"I certainly understand the desire on part of the administration potentially to have more manufacturing done in the U.S., but this is sticky when you have a system right now that is giving us, in many cases, lower priced products."

So, what does this mean for North Carolina?

Walden said one of North Carolina's biggest industries that could be impacted by counter tariffs is auto parts. 

He said that also includes assembly plants.

"We don't yet have an up-and-functioning auto assembly plant; that's what VinFast is designed to do eventually," Walden said. "But that would mean that those auto parts that we make, a lot of which go to Mexico for assembly, would have a tax on it, a tariff on it." 

Another industry that could be affected is the pharmaceutical industry here in North Carolina.

"We also sell pharmaceuticals...to both countries (chemicals, etc.)," Walden said. "So I think the last time I looked, the value of exports coming out of just North Carolina to Canada and Mexico, collectively is $13 billion a year. So that's another part of this puzzle to pay attention to."

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