According to the White House on Saturday, President Donald Trump has imposed tariffs on goods entering the United States from Canada, Mexico, and China. This could lead to a trade war with America’s closest trading partners and increase the cost of everything from avocados to cars.
When the tariffs will go into effect is unknown.
The 10% tariff rate would be reduced for energy items from Canada.
Trump stated that the countries were allowing fentanyl to enter the United States, which is why he was enacting the tariffs. Nearly 70% of the roughly 107,000 drug overdose deaths in 2023 were caused by opioids, especially fentanyl. Additionally, Trump said that the duties were a reaction to a trade imbalance between the United States and the three nations, as the United States imports more goods from them than it exports.
Economists from all political parties anticipate that tariffs will raise the prices that consumers pay for a variety of products, such as lumber, electronics, cars, and food. Like a tax, tariffs are paid by businesses that import goods into the United States.
Some companies will try to find new suppliers, but those who have no other choice will have to pay the fees. Automakers will have to pay a tariff every time a component crosses the northern or southern border, which occurs frequently during the production of a single vehicle; homebuilders will pay more for Canadian lumber; and U.S. grocery stores will pay more for fruits and vegetables grown in Mexico.
Businesses will need to determine whether to absorb these increased expenses or pass them on to customers, which might reduce profits or necessitate margin protection. Given that American firms and consumers import more items from Mexico than any other nation, the ramifications might have a significant impact on the whole U.S. economy.
Trump used tariffs as a key component of his campaign argument to boost the economy, which many people claimed was the reason they wanted him back in the White House. He has said that by raising the cost of foreign goods and incentivizing businesses to manufacture in the United States, the taxes will shield American sectors from unfair competition. Additionally, he has suggested utilizing tariffs as a negotiation tactic and using the money they generate to fund other legislative initiatives.
A senior administration official declared, “This is a beautiful, beautiful example of promises made, promises kept by President Trump.”
The official stated that the United States was seeking an end to fentanyl and illegal immigration, but not any particular measures from the three nations to remove the tariffs.
“There s going to be a wide range of metrics, and in Donald Trump s golden age we will have only legal immigration and we will have zero Americans dying from Chinese, slash Mexican, slash Canadian fentanyl,” added the official.
However, analysts have concluded that Trump’s first-term tariffs on China accomplished nothing to achieve those objectives. Instead, they increased the cost of many imports, restricted business investments, and resulted in a net loss of manufacturing employment. Trump issued payments to American farmers to compensate them for their losses from tariffs China levied in retaliation, using almost all of the money he received from his earlier penalties on China. Additionally, Beijing, which has not fulfilled many of its obligations under a trade agreement struck during Trump’s first term, did not make any notable concessions in response to the levies.
The United States-Mexico-Canada Agreement, one of the president’s major trade agreements, is in danger of being overturned by his most recent tariffs on Canada and Mexico. Since it essentially permitted goods to travel freely between the three nations, as they had for decades under the NAFTA pact that the USMCA replaced, Trump had hailed the accord as a success. The increased tariffs have the potential to jeopardize the present trade agreement considerably sooner than the July 2026 review date.
He is not altering the work of another government in this way. Francisco Sanches, an international trade lawyer with Holland and Knight and a former U.S. undersecretary of commerce for trade under the Obama administration, said that he is altering the activities of his government.
According to the White House, Trump would apply the International Emergency Economic Powers Act to impose the tariffs. Trump said he had the legal right to control imports during a national emergency, which he declared at the southern border on his first day in office, despite the USMCA.
Trump has increased his focus on Canada and Mexico since winning the election, although the majority of his tariff threats during his campaign were directed at China. Both nations promised to strike back, which would affect American companies that export in those countries and reduce the competitiveness of American goods there. Among the most popular U.S. exports to Canada and Mexico are automobiles, oil and gas, electronics, industrial equipment, and agricultural products.
Greta Peisch, a trade lawyer at Wiley Rein and former general counsel for the U.S. Trade Representative under the Biden administration, said, “What we’ve seen in these kinds of situations where the United States has placed tariffs on another country is an attempt by our trading partners to target really sensitive stakeholders and locations.” They are quite astute and know how our procedure operates and what could have an effect.
According to a senior administration official, the executive order imposing the tariffs contains a “retaliation clause” that states that the United States will take further measures if any nation decides to react.
According to a Peterson Institute research, a trade war between the three nations would slow economic development for each of them, but it might have a particularly negative effect on Mexico.
A 25% tariff would be disastrous for Mexico. According to the paper, the tariff’s negative economic effects may also make it more attractive for Mexican immigrants to enter the US illegally, which runs counter to another Trump administration aim.
One of the sectors most susceptible to the effects of tariffs is the American auto industry. Its supply chains have been closely linked to those of America’s northern and southern neighbors for many years. Recurring 25% taxes could swiftly raise vehicle costs because cars and their components cross borders several times during the production process.
Mexico is a major supplier of tomatoes, avocados, berries, and peppers, and the United States likewise relies on its agricultural exports.Voters and consumers are particularly concerned about rising food prices, which Trump emphasized during the campaign. Over the last four years, grocery prices have increased by almost 25%.
Following his initial threats, Mexico vowed to impose retaliatory tariffs of approximately $360 billion on American goods traded in Mexico. who might be detrimental to American companies who sell to Mexican customers.
In addition to immigration, Trump and lawmakers have expressed concern that China might be evading tariffs by utilizing Mexico as a back door into the United States. In an attempt to circumvent the tariffs Trump imposed on China during his first administration, asurgein manufacturers have been moving from China to Mexico.According to data provided by the research firm Rhodium Group, the number of investment projects announced by Chinese companies in Mexico has increased in recent years.
According to Dustin Jalbert, a senior economist for wood products at Fastmarkets, the duties on Canada are anticipated to raise the cost of Canadian lumber, which is renowned for being lighter and simpler to work with.
Prior U.S.-imposed levies and the devastation of millions of acres of forest due to a pine beetle infestation have already caused problems for Canadian lumber companies. He warned that additional tariffs may severely cripple the sector.
Because there will ultimately be less supply available in the market and prices will be somewhat higher, consumers will ultimately pay for that, according to Jalbert.
The National Association of housing Builders has cautioned that this might continue to put pressure on housing prices, which are already well out of reach for millions of Americans.
Since petroleum is one of Canada’s biggest exports to the United States, the tariffs may also raise gas prices, undermining Trump’s bold promise to cut energy costs in half during his first year in office.