By signing an executive order imposing tariffs on goods entering the United States from China, Canada, and Mexico, President Donald Trump increased the likelihood of a trade war with the country’s closest trading partners and threatened to raise costs on everything from avocados to cars.
In order to “minimize any disruptive effects we might have on gasoline and home heating oil prices,” the senior administration official stated that only Canadian energy items would be excluded from the tariffs. These products would have a lower tariff rate of 10%.
On Tuesday, the United States will start collecting the tariffs on Canadian goods. When the tariffs on China and Mexico would take effect is unknown.
Trump claimed that the reason for the tariffs was that the nations were permitting the entry of fentanyl into the United States.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.
Trump wrote, “We need to protect Americans, and it is my duty as President to ensure the safety of all,” announcing his signing of the tariffs in a post on Truth Social. “I made a promise on my Campaign to stop the flood of illegal aliens and drugs from pouring across our Borders, and Americans overwhelmingly voted in favor of it.”
The precise steps the United States wanted the three nations to take to remove the tariffs were not made clear.
During a call with reporters on Saturday regarding the tariffs, a senior administration official stated that there would be a wide range of criteria.
According to the official, during Donald Trump’s heyday, there will only be lawful immigration and no Americans will be killed by Chinese, Mexican, or Canadian fentanyl.
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. Following the tariff announcement, a variety of companies, including home builders and alcoholic beverage manufacturers, issued warnings about the detrimental economic effects the tariffs will have on consumers and businesses.
According to Carl Harris, chair of the National Association of Home Builders, imposing further taxes on these imports will raise the cost of materials, which will then be passed on to homebuyers in the form of higher house prices.
reconstructing efforts in areas hit by natural disasters, which you have promised to assist in reconstructing as soon as possible, may also be hampered by additional supply chain disruptions brought on by higher tariffs and increased demand for goods, Harris continued.
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.
The senior administration official declared, “This is a beautiful, beautiful example of promises made, promises kept by President Trump.”
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 broad tariffs may harm workers, according to the United Steelworkers International, which has advocated for trade reforms to safeguard American steel workers.
“Not just Canada is harmed by these tariffs. According to David McCall, president of the United Steelworkers International, “they pose a threat to the stability of industries on both sides of the border.”
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. On the first day of his second term, Trump proclaimed a national emergency at the southern border, claiming he had the legal right to control imports 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 senior administration officials, 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, one of the leading exporters of tomatoes, avocados, berries, and peppers, is another source of food goods that the United States depends on.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%. Additionally, the tariffs may raise the cost of imported wine and beer from Mexico.
According to a statement from the Distilled Spirt Council, “We are extremely concerned that U.S. tariffs on imported spirits from Canada and Mexico will seriously harm all three countries and lead to a cycle of retaliatory tariffs that negatively impacts our shared industry.”
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.