Title: Tariffs and Prices: A Mathematical Analysis of Trade Policy Impact

February 3, 2025

The recent discussions around imposing significant tariffs on major U.S. trading partners raise an important question: How would these policies affect everyday prices? Using current trade data and economic modeling, we've analyzed the potential impact of proposed 25% tariffs on Canadian and Mexican imports, alongside 10% tariffs on Chinese imports.

Trade Share Reality Check Recent data shows U.S. import dependencies are:

• Canada/Mexico: 17%

• China: 18%

• Rest of World: 65%

Understanding Import Categories Capital goods are physical assets used in producing other goods or services, including manufacturing equipment, industrial robots, commercial vehicles, factory equipment, and infrastructure components. For example, when Boeing purchases machines to build airplanes or farmers buy tractors, they're investing in capital goods.

Price Impact Analysis by Sector Our mathematical model incorporates current import shares, proposed tariff rates, and price elasticity of demand using the formula: (Import Share × Tariff Rate) × Elasticity Adjustment

Sector Impact Data:

Sector	NAFTA Share	China Share	Price Impact
Automotive	43%	8%	7.2-8.5%
Consumer Goods	17%	22%	5.8-6.4%
Industrial Supplies	21%	15%	4.5-5.3%
Food/Agriculture	24%	4%	4.2-5.1%
Capital Goods	15%	19%	3.8-4.4%

Market Dynamics Price elasticity significantly moderates these increases. Consumer behavior and market competition typically reduce actual price increases by 20-40% from the direct tariff impact.

Why Capital Goods Show Resilience Capital goods demonstrate lower price sensitivity to tariffs due to longer purchasing cycles, global supply chain diversification, cost amortization over longer periods, greater negotiating power, and more flexibility in sourcing options.

Conclusion While tariffs would likely increase consumer prices, the impact varies significantly by sector. The automotive industry faces the highest risk due to its reliance on North American supply chains, while capital goods show more resilience due to diverse sourcing options.

Methodology Note This analysis uses 2023-2024 trade data and incorporates sector-specific elasticity measures. All calculations consider current trade patterns and historical price response data.

About the Author By Michael Jordan, Ed.D [Post crafted with assistance from Claude AI to ensure mathematical accuracy and clarity.]