WASHINGTON – President Donald Trump said he would proceed with new tariffs on Canada and Mexico starting Tuesday, a move against the two largest U.S. trading partners that underscores his push to reshape global trade.
“No room left for Mexico or for Canada,” Trump told reporters on Monday when asked if the United States’ North American neighbors could reach a deal to delay the duties, as they did a month ago. “They’re all set. They go into effect tomorrow.”
The White House later said Trump signed an order doubling a tariff on China to 20%, which will take effect shortly after midnight in Washington. The directive stated that Beijing had “not taken adequate steps” to curb the flow of illicit fentanyl into the U.S.
Trump’s comments accelerated a sell-off in U.S. stocks, with the S&P 500 falling 1.76% on the day. The Canadian dollar and Mexican peso also dropped after Trump reaffirmed his plan to implement the new import taxes.
Doused hopes
The president’s remarks dimmed hopes of avoiding a full-scale continental trade war. Canada is preparing retaliatory tariffs, and Trump has another round of levies set to take effect 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 that Trump is serious about tariffs.”
The long-promised duties would be among the most sweeping of Trump’s presidency, applying to about $1.5 trillion in annual imports. They include a 25% tariff on all imports from Canada and Mexico, except for 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, steal our jobs, take our factories and take our businesses without being punished – and they’re being punished by tariffs.”
Trump administration officials have offered conflicting signals about the final outcome for the United States’ North American trading partners, saying the decision ultimately rests with Trump.
A month ago, Trump issued a barrage of trade threats, suggesting that the strength of the U.S. economy gave him leverage in any talks. However, growth is showing signs of weakening, partly due to widespread tariff uncertainty.
A private survey released on Monday indicated that American factory activity last month edged closer to stagnation. Growth slowed while inflation accelerated, with new orders and employment contracting. A gauge of prices paid for materials jumped to the highest level since June 2022.
Wavered as bonds climbed
After the data was released, a rebound in U.S. stocks wavered as bond prices climbed. Global equity markets are outperforming U.S. stocks in early 2025.
Sen. Ron Johnson, a Wisconsin Republican, said on Monday that he worried Trump’s tariffs on Canada and Mexico would worsen 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 could raise U.S. car prices by as much as $12,000, according to a new study from Anderson Economic Group. Auto companies are likely to pass on the increased costs to consumers.
In a sign that the White House is preparing for implementation, Trump late Sunday night amended previous executive orders. The changes suspend a provision that curbed duty-free shipping and allow time to develop a method for imposing tariffs on low-value items sent from Mexico or Canada that were previously exempt.
During a press conference on Monday, Mexican President Claudia Sheinbaum said her government would wait for Trump’s final decision before responding with retaliatory measures. Mexico did not immediately address Trump’s later remarks.
Canada plans to impose tariffs on $20.6 billion in U.S. exports, including orange juice, peanut butter, wine and coffee. A second tranche of duties, worth $86 billion, will follow in a few weeks on products such as cars, trucks, steel and aluminum, according to Canadian Foreign Minister Melanie Joly.
China’s response
Beijing is considering retaliatory measures targeting American agriculture and food products in response to the Trump administration’s tariffs, according to the Global Times, a Chinese news outlet sometimes used to signal Beijing’s positions to the outside world.
The new tariffs may help raise revenue for some of Trump’s proposed tax cuts while countering the notion that his threats were merely negotiating tactics.
Yet they also risk reigniting inflation, disrupting North American supply chains – especially in the auto industry – and prompting legal challenges under the free-trade pact Trump renegotiated in his first term.
Trump’s tariff plans could further weaken a U.S. economy already showing signs of strain. Stocks and cryptocurrencies have declined from recent record highs, consumer confidence has dropped and inflation remains persistent. A fresh trade war could trigger a broader market sell-off.
Prime Minister Justin Trudeau’s government has considered applying an export tax on crude oil to ensure U.S. drivers feel the economic impact of Trump’s trade war. However, Trudeau is set to leave office soon, and it remains unclear if the policy will be implemented.
Last October, Canada imposed 100% tariffs on Chinese-made electric vehicles and 25% tariffs on specific Chinese steel and aluminum products.
‘Work to ensure’
“We will continue to work to ensure there are no tariffs on Tuesday. But if there are, as we were ready to do last time, we will have a strong, unequivocal and proportional response, as Canadians expect,” Trudeau said on Sunday.
Trump’s proposed tariffs on Mexico would apply to all imports. Sheinbaum has considered countermeasures, including potential new tariffs on China. Treasury Secretary Scott Bessent called the idea “very interesting” and encouraged both neighbors to pursue it. Canada has previously announced similar measures.
U.S.-Mexico talks on security and counternarcotics are more advanced than discussions on trade and tariffs, according to two sources familiar with the negotiations. To demonstrate cooperation with the U.S., Mexico extradited 29 people accused of drug trafficking and other crimes last Thursday. Officials hoped this move would buy time before the tariffs took effect and allow trade talks to continue.
Trump is also planning additional tariffs based on reports due by April 1. One proposal involves “reciprocal tariffs,” under which Trump would impose country-specific rates based on factors such as other nations’ tariffs, trade barriers and tax policies. It remains unclear whether existing tariffs, including those on Mexico and Canada, would be included in the calculations.
‘Opportunity to remedy that’
“We are going to evaluate that and give them an opportunity to remedy that,” Bessent said on CBS’ “Face the Nation.” “We could either see a ratcheting up in tariffs, or if our trading partners correct unfair trade practices, the tariffs could come off.”
Another set of tariffs includes a 25% levy on steel and aluminum, set to take effect March 12, which would significantly impact Canada and Mexico.
Trump also plans tariffs on autos, semiconductor chips and pharmaceutical drugs, which could be imposed as soon as April 2. He has launched an investigation that may result in new copper tariffs later this year.
On Saturday, he ordered the Commerce Department to investigate the national security impact of lumber imports, laying the groundwork for tariffs primarily targeting Canada.
Canada and Mexico have both worked to head off tariffs, apparently to no avail. Canada appointed a fentanyl czar and introduced new border security measures, as Trump had requested. However, Trump has said it’s not enough, and a White House official stated the metric he is watching is domestic fentanyl-related deaths.
The situation has created confusion over what, if anything, Canada can offer to prevent a trade war. Since October 2021, only 70 pounds (31.8 kg) of fentanyl have been seized on or near the United States’ northern border. Canada has also already imposed restrictions on China and pledged additional measures.
China, meanwhile, said the U.S. should focus on “reducing domestic drug demand” and increasing law enforcement efforts to curb 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.
