On Monday, President Donald Trump announced that 25% tariffs on imports from Mexico and Canada will begin Tuesday, reigniting concerns about a potential North American trade war that could drive up inflation and slow economic growth. Trump stated that the tariffs would start the following day, emphasizing that Mexico and Canada would have to comply. The tariffs are part of Trump’s push to address issues like fentanyl trafficking, illegal immigration, and trade imbalances, while also encouraging more manufacturing to return to the U.S.
The announcement caused immediate turmoil in the U.S. stock market, with the S&P 500 falling 2%. Despite the economic risks, the Trump administration remains confident that these tariffs will help boost U.S. manufacturing and attract investment. Commerce Secretary Howard Lutnick pointed to the example of TSMC, a chipmaker, expanding its U.S. investment due to the possibility of tariffs.
Trump had previously delayed the tariffs for a month in February after receiving promises of concessions from Mexico and Canada, but now he insists there is “no room left” for further delay. The tariffs will include a lower 10% tax on Canadian energy products such as oil and electricity.
In response, Canadian Foreign Minister Mélanie Joly said Canada was prepared to impose its own tariffs worth $155 billion. Mexican President Claudia Sheinbaum, meanwhile, stated that Mexico would respond according to Trump’s decision, but emphasized the country’s readiness with a plan in place. Both countries have taken actions to address Trump’s concerns, with Mexico deploying National Guard troops to combat drug trafficking and illegal immigration, and Canada appointing a fentanyl czar.
While Trump’s decision had been uncertain up until the last minute, it is now clear that the tariffs will go into effect. Treasury Secretary Scott Bessent mentioned that Mexico had offered to impose 20% taxes on all imports from China as part of ongoing discussions. However, U.S. businesses, including Ford and Walmart, have warned of the negative effects the tariffs could have on their operations, and several analyses predict significant price hikes for U.S. consumers.
Democrats were quick to criticize Trump’s move, arguing that it would worsen inflation and damage U.S. relationships with allies. Senate Democratic Leader Chuck Schumer and other lawmakers pointed out the potential economic consequences for industries like agriculture.
Trump also announced plans for “reciprocal” tariffs in April, which would match the tax rates imposed by other countries, including their subsidies and value-added taxes.
