President Donald Trump's sweeping 25% tariffs on Mexico and Canada took effect Tuesday, marking an extraordinary move aimed at pressuring America's closest trading partners. However, the aggressive trade policy threatens to strain the North American economy—including the United States—at a time of mounting concerns over inflation.
Trump also doubled the tariff on all Chinese imports to 20%, up from 10%, compounding existing duties on hundreds of billions of dollars in Chinese goods. The move drew immediate retaliation from both Canada and China, raising fears of a full-scale trade war that could disrupt global markets and push prices higher for American consumers.
The Trump administration defended the tariffs as a necessary measure to curb the influx of fentanyl into the U.S.
"While President Trump gave both Canada and Mexico ample opportunity to curb the dangerous cartel activity and influx of lethal drugs flowing into our country, they have failed to adequately address the situation," the White House said in a statement released just before the tariffs took effect.
Despite the administration's rationale, the tariffs come at a time when inflation remains persistently high. The impact is expected to hit U.S. consumers hard, with prices rising on a wide array of goods imported from the three nations. Canada and Mexico collectively shipped $1.4 trillion worth of goods to the U.S. last year, making up over 40% of all American imports, according to Commerce Department data.
Notably, the only Canadian imports exempt from the 25% tariff are energy-related products such as crude oil, which will instead face a 10% tax. Meanwhile, key imports from Mexico, Canada, and China—such as fresh produce, cars and auto parts, and electronics including phones and computers—will see tariffs between 20% and 25%.
The global auto industry felt the effects immediately, with major car manufacturers experiencing sharp stock declines Tuesday morning. Volkswagen fell nearly 4%, while Stellantis (STLA)—maker of Chrysler and Jeep—dropped almost 7%.
China responded swiftly, announcing 15% tariffs on U.S. agricultural products, including chicken, wheat, corn, and cotton, according to the State Council Tariff Commission. Additional 10% duties were imposed on sorghum, soybeans, pork, beef, seafood, fruits, vegetables, and dairy products. Beijing also added 15 American firms, including drone maker Skydio, to its export control list, limiting their ability to receive critical Chinese materials.
Alfredo Montufar-Helu, head of the China Center for the Conference Board, said Beijing's countermeasures were a "restrained, targeted approach aimed at causing pain to those industries that matter the most to the supporters of the Trump administration."
China's Foreign Ministry did not mince words, with spokesperson Lin Jian declaring, "China will fight till the end" if the U.S. persists in escalating trade tensions.
"I want to reiterate that the Chinese people have never feared evil or ghosts, nor have we ever bowed to hegemony or bullying," Lin said. "Pressure, coercion, and threats are not the right ways to engage with China."
Trump's tariffs also provoked swift backlash from Canada. Hours before they took effect, Prime Minister Justin Trudeau vowed immediate retaliation, unveiling tariffs on $30 billion of U.S. goods. By March 25, he said Canada would impose an additional $125 billion in tariffs.
"Canada will not let this unjustified decision go unanswered," Trudeau stated.
Ontario Premier Doug Ford also reinforced his warning that Canada's largest province could cut off energy exports to the U.S. if tensions escalate.
"If they want to try to annihilate Ontario, I will do everything, including cut off their energy, with a smile on my face. And I'm encouraging every other province to do the same," Ford told reporters, emphasizing the eastern U.S. reliance on Canadian energy.
Despite Trump's previous claims that exporters bear the cost of tariffs, economic experts note that it is American importers who pay the fees upfront. These businesses typically pass the costs to consumers through higher prices, further fueling inflation. Some companies may choose to absorb the added expenses, but many will have little choice but to raise prices, intensifying financial pressure on households already struggling with rising costs.
