President Donald Trump said he would plow ahead with new tariffs on Canada and Mexico starting Tuesday, a broadside against the two biggest U.S. trading partners that underscores his push to remake global trade.
“No room left for Mexico or for Canada,” Trump told reporters Monday when asked if the U.S.’s North American neighbors could reach a deal to put off the duties, as they did a month ago. “They’re all set. They go into effect tomorrow.”
The White House later said Trump also signed an order doubling a tariff on China to 20% that will take effect shortly after midnight in Washington. The directive said Beijing had “not taken adequate steps” to address the flow of illicit fentanyl into the U.S.
Trump’s comments accelerated a sell off in U.S. stocks, with S&P 500 down 1.76% on the day. The Canadian dollar and Mexican peso slumped after Trump reaffirmed his plans to go ahead with the new import taxes.
The president’s remarks doused hopes of avoiding an all-out continental trade war. Canada is preparing its own retaliatory tariffs, and Trump has another round of levies set to kick in next week on steel and aluminum.
“We’re on the cusp of a North American trade war,” said Josh Lipsky, senior director of the Atlantic Council’s GeoEconomics Center. “The markets have woken up to the fact Trump is serious about tariffs.”
The long-promised duties would easily be among the most sweeping of the Trump era, applying to around $1.5 trillion in annual imports. They would put a 25% tariff on all imports from Canada and Mexico, except Canadian energy, which would face a 10% rate.
“Tariffs are easy, they’re fast, they’re efficient and they bring fairness,” Trump said. “It’s going to be very costly for people to take advantage of this country. They can’t come in and steal our money and steal our jobs and take our factories and take our businesses and expect not to be punished — and they’re being punished by tariffs.”
Trump administration officials earlier gave conflicting signals about the final outcome for the US’s North American trading partners, saying it’ll come down to Trump’s decision of their progress.
A month ago, Trump unleashed a barrage of trade threats and suggested the strength of the U.S. economy gave him more leverage in any talks. Now growth is showing signs of weakening partly because of widespread tariff uncertainty.
A private survey released Monday showed American factory activity last month edged closer to stagnation — slowing growth combined with faster inflation — as new orders and employment contracted. A gauge of prices paid for materials jumped to the highest since June 2022.
After the data were released, a rebound in U.S. stocks wavered as bonds climbed after the data. Equity markets around the world are trouncing U.S. stocks in early 2025.
Senator Ron Johnson, a Wisconsin Republican, said Monday he worried Trump’s tariffs on Canada and Mexico will exacerbate inflation. “You disrupt all kinds of supply lines and supply chains and potentially increase costs to consumers. There are concerns,” he told reporters at the Capitol.
The tariffs on Canada and Mexico risk driving up U.S. car prices by as much as $12,000, according to a new study from Anderson Economic Group, as auto companies are likely to pass on the increased costs to consumers.
In a signal the White House was laying the groundwork for implementation, Trump late Sunday night amended the executive orders issued earlier in his administration. The change pauses a provision of the tariff move aimed at curtailing duty-free shipping, and allows the U.S. time to develop and deploy a method of imposing tariffs on low-value items sent from Mexico or Canada that would have previously been exempted from tariffs.
During a press conference on Monday, Mexican President Claudia Sheinbaum said her government will wait for Trump’s final decision before reacting with retaliatory measures. Mexico did not immediately respond to Trump’s remarks later Monday.
Canada plans to respond with its own tariffs against U.S. products. The retaliation plan that was unveiled by Prime Minister Justin Trudeau last month includes immediate levies on $20.7 billion of goods from U.S. exporters, including orange juice, peanut butter and coffee, as well as second tranche of duties in a few weeks on about $86 billion worth of products, including cars, trucks, steel and aluminum.
“Should the U.S. decide to launch their trade war, we will be ready. We are not looking for this. We’re not seeking this,” Canadian Foreign Minister Melanie Joly said.
Doug Ford, the premier of Ontario, added a new threat Monday — to cut off nickel exports to the U.S. to put pressure on its manufacturing sector. The leader of the Canadian province has also said his government would force liquor stores to remove U.S.-manufactured alcohol from shelves in the province, among other measures.
China’s Response
Beijing is considering retaliation on American agriculture and food products in response to tariffs from the Trump administration, according to the Global Times, a news outlet that’s occasionally used to signal China’s positions to the outside world.
A slate of new tariffs may help raise revenue for some of the tax cuts Trump wants and lay to rest, at least for now, the theory that Trump’s brazen threats were bluffs to use as negotiating leverage.
Yet they also threaten to reignite inflation that the Federal Reserve is finding stubborn, throw North American supply chains into disarray — especially the auto industry — and invite legal challenges based on a continental free-trade pact Trump himself renegotiated during his first term.
Trump’s plans also risk weakening a U.S. economy that is already showing signs of strain. Stocks and cryptocurrencies have fallen from recent record highs, consumer confidence dropped sharply and inflation continues to simmer. A fresh tariff war threatens to trigger a wider sell off.
Prime Minister Justin Trudeau’s government has mused about applying its own export tax to crude to make sure U.S. drivers feel the pain of Trump’s trade war. It’s not yet clear if they will, and Trudeau is about to leave office.
Last October, the Canadian government imposed 100% tariffs on Chinese-made electric vehicles and 25% tariffs on a list of Chinese steel and aluminum products.
“We will continue to work to ensure to do everything we can to make sure that there are no tariffs on Tuesday, but if ever there were tariffs on Tuesday, as we have all seen — as we were ready to do last time — we will have a strong unequivocal and proportional response as Canadians expect,” Trudeau said Sunday.
The proposed Trump tariffs on Mexico apply to all imports. Sheinbaum has weighed her own steps to stave them off, including potential new tariffs on China. Treasury Secretary Scott Bessent called it “very interesting” and encouraged both neighbors to do so. Canada has announced similar measures previously.
US-Mexico talks on security and counter-narcotics are further advanced than on trade and tariffs, two people familiar with the discussions have said. In a bid to show its willingness to cooperate with the U.S. on security, Mexico on Thursday handed over 29 people accused of drug trafficking and other crimes to face charges in the US. Mexican officials thought that could be enough to buy them more time before tariffs were imposed and allow for talks on trade relations to continue, according to a person familiar with the matter.
Trump is also planning other streams of tariffs based on reports due to him by April 1. One is for so-called “reciprocal tariffs,” under which Trump will charge country-by-country rates, based on calculations such as another country’s tariffs, trade barriers and tax regimes. It’s not clear whether the “reciprocal” calculation would include any tariffs already in place, such as the Mexico and Canada measures that Trump has tied to border security.
“We are going to evaluate that and give them an opportunity to remedy that, so we could either see a ratcheting up in tariffs, or if our trading partners want to remedy what has been unfair trade, then we can see the tariffs come off,” Bessent said on CBS’s Face the Nation.
Another stream is a series of tariffs on specific sectors. That includes a 25% tariff on steel and aluminum due to take effect March 12, and which would heavily affect Canada and Mexico.
Trump is also planning sectoral tariffs on autos, semiconductor chips and pharmaceutical drugs, all of which could be imposed as soon as April 2. He launched an investigation that could lead to new copper tariffs later this year. And on Saturday, he ordered the Commerce Department to investigate the national security harm posed by lumber imports, laying the legal groundwork for new tariffs — ones that again appear aimed at Canada.
Canada and Mexico have both worked to head off tariffs, apparently to no avail. Canada appointed a fentanyl czar and dedicated new measures to border security, as Trump had asked. Trump has said it’s not enough, and a White House official has said the metric Trump is watching is domestic deaths from fentanyl.
It has all sown confusion on what, if anything, Canada can offer to stave off a trade war, given that only 70 pounds of fentanyl have been seized on or near the U.S.’s northern border since October 2021 and it has imposed existing and pledged curbs on China.
China, too, said the U.S. should focus on “reducing domestic drug demand” and increase law enforcement to curb domestic fentanyl use.
“The unilateral tariff increase by the U.S. seriously violates WTO rules and is a typical act of unilateralism and trade protectionism,” The Chinese Embassy said in a written statement.
