WASHINGTON, USA — President Donald Trump signed an executive order imposing tariffs on imports from Canada, Mexico, and China.
The move risks escalating trade tensions with America’s closest economic partners and increasing costs for U.S. consumers on cars, electronics, lumber, and food.
The new tariffs, announced late Monday, will take effect on Canadian imports starting Tuesday, with no clear timeline for the implementation of levies on Mexican and Chinese goods.
The only exemption applies to Canadian energy products, which will face a reduced tariff rate of 10% in an effort to limit disruptions to gasoline and home heating oil prices, a senior administration official said.
Trade War on the Horizon?
The White House stated that the tariffs are intended to pressure Canada, Mexico, and China into taking stronger action against fentanyl production and illegal immigration.
“We need to protect Americans, and it is my duty as President to ensure the safety of all,” Trump wrote on Truth Social, citing the flow of illegal drugs and migrants across U.S. borders as justification for the new trade barriers.
More than 107,000 people died from drug overdoses in 2023, with nearly 70% of deaths linked to opioids, including fentanyl.
However, data from U.S. Customs and Border Protection (CBP) shows that most fentanyl seizures occur at the southern border, with only 43 pounds intercepted at the northern border in 2024.
Despite the administration’s stated intent, it remains unclear what specific actions Canada, Mexico, and China would need to take in order to have the tariffs lifted.
Economic Fallout and Rising Costs
Economists across the political spectrum warn that the tariffs will lead to higher prices for consumers and businesses, impacting a wide range of industries.
“Imposing additional tariffs on these imports will lead to higher material costs, which will ultimately be passed on to home buyers,” said Carl Harris, chairman of the National Association of Home Builders.
Industry leaders from agriculture, auto manufacturing, and construction have voiced similar concerns, citing potential disruptions in supply chains and rising production costs.
- Automakers will face repeated tariffs as vehicle parts cross the northern and southern borders multiple times during production.
- Grocery stores will pay more for fruits and vegetables from Mexico, including tomatoes, avocados, berries, and peppers.
- Homebuilders will see higher costs for Canadian lumber, which is widely used in construction.
The United Auto Workers (UAW) union criticized the move, warning that tariffs could harm American workers.
“We do not support using factory workers as pawns in a fight over immigration or drug policy,” said UAW President Shawn Fain.
Business Leaders and Trade Experts Warn of Repercussions
Many businesses depend on Canadian and Mexican suppliers for raw materials and components that aren’t available in the U.S.
The Aluminum Association, which represents U.S. aluminum manufacturers, noted that America imports two-thirds of its aluminum from Canada and that U.S.-based smelters cannot meet domestic demand.
“It would take billions of investment over decades to make the United States fully self-sufficient for its metal needs,” the group said, urging the administration to exempt aluminum imports from the tariffs.
The Consumer Brands Association, which represents food and health product manufacturers, also warned that tariffs on essential ingredients could drive up costs.
“Tariffs on all imported goods from Mexico and Canada — especially on ingredients and inputs that aren’t available in the U.S. — could lead to higher consumer prices and retaliation against U.S. exporters,” the group stated.
Retaliation Expected from Canada and Mexico
Both Canada and Mexico have signalled that they will retaliate against the tariffs, which could reduce the competitiveness of U.S. goods in their markets.
Trump’s move also threatens the United States-Mexico-Canada Agreement (USMCA), the trade deal he signed in 2020 to replace NAFTA.
The agreement had eliminated most tariffs between the three countries, boosting trade flows and fostering cross-border supply chains.
“This is not him changing some other administration’s work. This is him changing his own administration’s work,” said Francisco Sanches, an international trade lawyer and former U.S. undersecretary of commerce for trade.
Impact on Energy, Food, and Manufacturing
The U.S. oil and gas industry could also feel the effects of tariffs on Canadian crude.
Canada is one of the top suppliers of crude oil to the U.S., and higher tariffs could push fuel prices higher, potentially undermining Trump’s pledge to cut energy costs in half during his first year in office.
The tariffs could also affect alcohol and beverage imports, including beer and spirits from Mexico and Canada.
“We are 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,” said the Distilled Spirits Council.
Trump’s Justification: A National Emergency Declaration
The White House said Trump would issue the tariffs under the International Emergency Economic Powers Act (IEEPA), citing his national emergency declaration at the U.S.-Mexico border.
This move allows the president to regulate imports and enforce trade restrictions, though experts anticipate legal challenges from affected industries.
Lessons from Trump’s First-Term Tariffs
During his first term, Trump imposed tariffs on China, arguing they would protect American manufacturing and pressure Beijing into making trade concessions. However, studies found that:
- Tariffs increased prices for American consumers and businesses.
- Many U.S. companies paid more for parts and materials, leading to job losses.
- China retaliated with its own tariffs, hurting U.S. farmers and manufacturers.
- Revenue from tariffs was used to provide aid to farmers who lost business due to the trade war.
The United Steelworkers International, which has long advocated for trade policies that support American workers, criticised Trump’s sweeping new tariffs.
“These tariffs don’t just hurt Canada. They threaten the stability of industries on both sides of the border,” said David McCall, president of the United Steelworkers International.
What’s Next?
A trade war between the U.S., Canada, and Mexico could slow economic growth in all three nations.
Mexico, in particular, could face severe economic consequences, which could increase migration pressures on the U.S.-Mexico border, contradicting one of Trump’s key policy objectives.
“For Mexico, a 25% tariff would be catastrophic,” noted a report from the Peterson Institute for International Economics.
“Moreover, the economic decline caused by the tariff could increase the incentives for Mexican immigrants to cross the border illegally into the U.S.”
As the U.S. auto industry, food sector, and construction industry brace for impact, businesses and policymakers are watching closely to see if Congress or the courts attempt to challenge Trump’s new trade war strategy.
