Table of Contents
WASHINGTON — President Donald Trump announced on Monday that the United States will impose 25% tariffs on imports from Mexico and Canada starting Tuesday, a move that has reignited fears of a North American trade war. The decision, which comes after a one-month delay granted in February, has already caused turmoil in the stock market, with the S&P 500 dropping 2% in afternoon trading.
Speaking in the Roosevelt Room at the White House, Trump justified the tariffs as a means to pressure Mexico and Canada to strengthen their efforts in combating fentanyl trafficking and illegal immigration. However, he also acknowledged that the measures aim to reduce the trade imbalance and encourage manufacturers to relocate to the United States.
“Tomorrow — tariffs 25% on Canada and 25% on Mexico. And that’ll start,” Trump told reporters. “They’re going to have to have a tariff.”
The tariffs will affect a wide range of goods, with Canadian energy products such as oil and electricity subject to a lower 10% rate. The administration has also confirmed that Chinese imports will face an additional 10% tariff, doubling to 20% on Tuesday.
“There could be some short-term disturbance, but long term, it's going to make our country a fortune,” he said.
Trump’s announcement sent shockwaves through the financial markets. The Dow Jones Industrial Average plummeted by 700 points (1.5%), while the tech-heavy Nasdaq dropped by 2.5%. Analysts warn that the new tariffs could further increase inflation and disrupt supply chains, potentially raising prices for everyday goods such as gasoline, automobiles, and agricultural products.
Several major corporations, including Ford and Walmart, have cautioned that tariffs could hurt their bottom lines. Economic research institutions, including the Peterson Institute for International Economics and the Yale University Budget Lab, estimate that the tariffs could cost the average American household over $1,000 in increased expenses.
Both Mexico and Canada have signaled that they are prepared to respond to the tariffs. Canadian Foreign Minister Mélanie Joly stated that her country has a counter-tariff plan in place, which includes $155 billion in retaliatory measures, with an initial tranche of $30 billion.
“If Trump is imposing tariffs, we are ready,” Joly said, emphasizing that Canada has communicated its strong border security policies to U.S. officials.
Mexican President Claudia Sheinbaum, who had been awaiting Trump’s final decision, expressed disappointment but maintained a calm approach. “It’s a decision that depends on the United States government,” she said. “Whatever his decision is, we will make our decisions, and there is a plan, there is unity in Mexico.”
In response to U.S. concerns, Mexico had deployed 10,000 National Guard troops to its northern border and extradited 29 cartel members to the U.S. in late February. Canada had also taken steps to address U.S. drug trafficking concerns by appointing a fentanyl czar. However, these efforts were insufficient to prevent the tariffs from going into effect.
Trump has hinted at further trade measures beyond the current tariffs. In April, his administration is set to introduce “reciprocal tariffs,” which would match import taxes imposed by other countries. Additionally, exemptions from Trump’s 2018 steel and aluminum tariffs are expected to be removed, and new tariffs on autos, computer chips, copper, and pharmaceutical drugs will be implemented.
Despite growing economic risks, Trump and his administration remain confident that tariffs will strengthen U.S. manufacturing and attract foreign investment. Commerce Secretary Howard Lutnick pointed to Taiwan Semiconductor Manufacturing Company’s (TSMC) expanded investment in the U.S. as evidence that the policy is effective.
Meanwhile, Treasury Secretary Scott Bessent stated that Mexico had proposed imposing a 20% tax on imports from China as part of its negotiations with the U.S. He also dismissed concerns that American consumers would bear the cost of tariffs, arguing that China would “eat” the expenses rather than passing them onto businesses and consumers.
The imposition of tariffs marks a significant shift in U.S. trade policy, intensifying tensions with two of its largest trading partners. While Trump insists that the measures will ultimately benefit American workers and industries, economic experts warn of higher costs for businesses and consumers, potential job losses, and further instability in the global economy.
