US President Donald Trump yesterday ordered 25 per cent tariffs on Canadian and Mexican imports and 10pc on goods from China starting on Tuesday to address a national emergency over fentanyl and illegal aliens entering the US, White House officials said.
Energy products from Canada will have only a 10pc duty, but Mexican energy imports will be charged the full 25pc, the officials told reporters.
Trump has declared the national emergency under the International Emergency Economic Powers Act to back the tariffs, which allows sweeping powers to address crises.
The White House officials said there would be no exclusions from the tariffs. Moreover, in the case of Canada specifically, they said the “de minimis” US tariff exemption for small shipments under $800 would be cancelled.
The moves follow through on a repeated threat Trump has made since shortly after winning last year’s presidential election, and they likely will trigger retaliation and risk igniting a trade war that could cause broad economic disruption for all countries involved.
It was unclear if Trump, who golfed at his Mar-a-Lago estate in Florida yesterday before signing the order, would speak to the media about the duties.
Trump set the February 1 deadline to press for strong action to halt the flow of the opiate fentanyl and precursor chemicals into the US from China via Mexico and Canada, as well as to stop illegal immigrants crossing US borders.
Less than two weeks into his second term, Trump is upending the norms of how the US is governed and interacts with its neighbours and wider world.
On Friday, he pledged to proceed with the levies despite acknowledging they could cause disruption and hardship for American households.
A model gauging the economic impact of Trump’s tariff plan from EY chief economist Greg Daco suggests it would reduce US growth by 1.5 percentage points this year, throw Canada and Mexico into recession and usher in “stagflation” at home.
“We have stressed that steep tariff increases against US trading partners could create a stagflationary shock – a negative economic hit combined with an inflationary impulse – while also triggering financial market volatility,” Daco wrote yesterday.
That volatility was evident on Friday, when the Mexican peso and Canadian dollar both slumped after Trump vowed to fulfil his threats. US stock prices also fell and Treasury bond yields rose.
Economists across the political spectrum expect tariffs to increase what consumers pay for a range of goods, including vehicles, electronics, produce and lumber. Tariffs are paid by companies importing goods into the US, similar to a tax.
While some businesses will look to source goods elsewhere, others with no alternatives will be forced to pay the fees. That means US grocery stores will shoulder higher costs for fruits and vegetables grown in Mexico; homebuilders will pay more for Canadian lumber; and carmakers will have to pay a tariff each time a component crosses the northern or southern border, which happens repeatedly during the production of a single vehicle.
Companies will have to decide whether to pass these higher costs to consumers or absorb them, which would dent profits or require cuts to protect their margins. The implications could be wide-reaching across the US economy, in part because American consumers and businesses imported more goods from Mexico than any other country.
The president’s latest tariffs on Canada and Mexico threaten to upend one of his signature trade pacts, the United States-Mexico-Canada Agreement. Trump had touted the deal as a victory, as it largely allowed products to move between the three countries tariff-free, much as they’d done for decades under the Nafta agreement that the USMCA replaced. The current trade deal isn’t up for review until July 2026, but the new tariffs could throw it into jeopardy much sooner.
“This is not him changing some other administration’s work. This is him changing his administration’s work,” said Francisco Sanches, an international trade lawyer with Holland and Knight and a former US under-secretary of commerce for trade during the Obama administration.
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