President Trump on Saturday signed an executive order that imposes 25% tariffs on imports from Canada and Mexico, while adding an additional 10% levy on goods from China. The salvo, which President Trump had threatened even before returning to power earlier this month, underlines his willingness to use trade policy even against some of the U.S.’ largest economic allies.
The tariffs take effect at 12:01 a.m. Tuesday. The order imposes 25% tariffs on goods from Canada, except for “energy resources” such as oil and gas, which will only be hit with a 10% tariff.
The order notes that should any of the three nations “retaliate against the United States” with “import duties” or “similar measures,” the president “may increase or expand in scope the duties imposed under this order to ensure the efficacy of this action.”
According to the White House, the salvo is aimed at curbing the flow of undocumented immigrants and illicit drugs into the U.S.; spurring a resurgence in domestic manufacturing; and raising federal revenue.
In retaliation for the tariffs, Canadian Prime Minister Justin Trudeau announced Saturday night he will place 25% tariffs on up to $155 billion in U.S. imports, the Associated Press reported.
John Murphy, senior vice president for the U.S. Chamber of Commerce, which bills itself as the world’s largest business organization, slammed Mr. Trump’s decision, writing in statement that “the imposition of tariffs under IEEPA is unprecedented, won’t solve these problems, and will only raise prices for American families and upend supply chains.”
Murphy added that the Chamber “will consult with our members, including main street businesses across the country impacted by this move, to determine next steps to prevent economic harm to Americans.”
Three trade associations for the distilled spirits industry — Distilled Spirits Council of the U.S., the Chamber of the Tequila Industry, and Spirits Canada — said in a joint statement that they were “deeply concerned that U.S. tariffs on imported spirits from Canada and Mexico will significantly harm all three countries and lead to a cycle of retaliatory tariffs that negatively impacts our shared industry.”
Bob Hemesath, an Iowa farmer and board chairman of Farmers for Free Trade, an agriculture group which advocates for more open trade, said in a statement that Canada, Mexico and China are “indispensable markets for the livelihood of the American ag economy,” and “placing tariffs on the three largest export markets for American farmers and ranchers, particularly for an extended period of time, would have severe consequences.”
House Speaker Mike Johnson praised the order, writing on social media that Mr. Trump is “holding Mexico, Canada, and China accountable for their role in the flow of illegal aliens and illicit drugs across our borders. These countries are now on notice to work quickly to stop the madness. This is long overdue.”
Senate Minority Leader Chuck Schumer criticized the move in a series of social media posts, one of which read: “You’re worried about grocery prices. Don’s raising prices with his tariffs.”
Experts warn that the impact of the tariffs could affect the economies of Canada, Mexico and China — the nation’s three biggest trading partners — as well as the U.S. itself. Canada’s economy could shrink by 3.6%, while Mexico could take a 2% hit, according to Cornell University economics professor Wendong Zhang.
At the same time, inflation in the U.S. could rise by as much as 1 percentage point, pushing it as high as 4% on an annual basis, or double the Federal Reserve’s goal for a 2% annual rate, Capital Economics said in a Jan. 28 research note.
“We have stressed that steep tariff increases against U.S. trading partners could create a stagflationary shock — a negative economic hit combined with an inflationary impulse — while also triggering financial market volatility,” said EY Chief Economist Gregory Daco in a Jan. 31 report.
Daco added, “These tariffs against Mexico, Canada and China would mark the first major wave of trade levies in Trump’s new term, with effects rippling far beyond those economies, as other nations brace for potential targeting and U.S. businesses navigate supply chain disruptions and retaliation risks.”
American consumers have been bracing for the impact of Mr. Trump’s tariffs, telling pollsters that they expected to see higher prices if the president followed through on his plans to enact them. Those expectations may have prompted some consumers to purchase goods before Mr. Trump’s inauguration on Jan. 20, economists say.
“The mere prospect of tariffs appears to be influencing the behavior of consumers and businesses,” analysts with Oxford Economics in a research note. “Imports surged in December, likely an attempt to front-run any tariffs, while consumers may be bringing forward spending in anticipation of tariff-related price hikes.”
U.S. consumers could see higher prices for produce and agricultural products imported from Canada and Mexico, including beef from the former and avocados and strawberries from the latter. Automobiles could see an average price increase of $3,000 each due to the tariffs, given the huge volume of cars now being built in Canada and Mexico, according to TD Economics.
