U.S. President Donald Trump announced on Monday that a 25% tariff on goods from Mexico and Canada would take effect on Tuesday, heightening concerns of a North American trade war and rattling financial markets.
His remarks triggered a sharp decline in U.S. stocks during late afternoon trading, while the Mexican peso and Canadian dollar also weakened.
“They’re going to have to face a tariff. What they need to do is build their car plants and other facilities in the United States—then they won’t have tariffs,” Trump stated at the White House.
Trump doubles down on tariffs, citing fentanyl crisis and trade imbalances
Trump stated there was “no room left” for a deal to prevent the tariffs by addressing fentanyl flows into the United States.
He also announced that reciprocal tariffs would take effect on April 2 against countries that impose duties on U.S. products. Additionally, he reaffirmed plans to raise tariffs on all Chinese imports from 10% to 20% as a penalty for Beijing’s continued shipment of fentanyl to the U.S., asserting that China “has not taken adequate steps to alleviate the illicit drug crisis.”
CEOs and economists warn that Trump’s tariffs on Canada and Mexico—which would affect over $900 billion in annual U.S. imports—would significantly disrupt the deeply integrated North American economy.
The Trump administration confirmed that the tariffs would take effect on Tuesday at 12:01 a.m. EST (0501 GMT). At that point, Canada and Mexico will face a 25% tariff, with Canadian energy products subject to a 10% duty. Mexican officials did not immediately respond to requests for comment.
Canadian Foreign Minister Mélanie Joly told reporters that Ottawa was prepared to respond. She noted that there’s a level of unpredictability and chaos coming from the Oval Office, and they would be dealing with it. Gustavo Flores-Macias, a public policy professor at Cornell University, said consumers could see price hikes within days.
“The automotive sector is expected to face significant negative impacts, not only due to disruptions in the supply chains that span all three countries but also because higher vehicle prices could weaken consumer demand,” said Flores-Macias.
Mexico, which first managed to evade Trump’s first round of tariffs by vowing to deploy thousands of troops to its northern border, has stepped up its anti-drug efforts and signalled it might also impose new measures on Chinese goods coming into Mexico.
At a press conference on Monday before Trump’s announcement, President Claudia Sheinbaum said that her government was calm while awaiting his decision. She still stressed that Mexico would retaliate if tariffs were enacted.
Mexico’s President Claudia Sheinbaum holds a press conference a day before the imposition of tariffs by U.S. President Donald Trump, at the National Palace in Mexico City, Mexico March 3, 2025. REUTERS/Luis Cortes
According to Sheinbaum the country has a plan B, C, and D,” Sheinbaum said, without providing specifics. She noted that trade and fentanyl-related cooperation with the U.S. had been “very good.”
According to the Centers for Disease Control and Prevention, synthetic opioids—primarily fentanyl—were responsible for 72,776 deaths in the U.S. in 2023.
Lawmakers and economists sound alarm on tariff fallout and inflation risks
Representative Suzan DelBene, a Democrat from Washington, warned that imposing tariffs on Canada and Mexico would burden American families with higher costs at the grocery store, gas pump, and pharmacy.
“No president should have the power to raise taxes without a vote in Congress,” she said in a statement.
Meanwhile, White House trade adviser Peter Navarro told CNBC on Monday that any inflationary impact from the tariffs would be “second-order small.” He added, “I don’t see the president wavering on this because he understands that to achieve a strong and prosperous America—with rising real wages and more factory jobs—this is the path he has chosen.”
On Saturday, Trump levelled up his targeted sanction initiatives by starting a national safety probe into lumber and wood items, which might produce tremendous new tariffs. He particularly delivered to Canada, a nation already dealing with 14.5% tariffs on softwood.
The prior week, Trump had actively reprimanded many Western nations for taxing American tech enterprises and threatened to sting more obstacles on billions of products. The same day, he imposed a new investigation into copper tariffs and other trade limitations.
Trump intends to impose U.S. “reciprocal tariffs” equivalent to those of other nations and has either removed trade barriers. The European Union might rapidly face this initiative since the VAT taxes imposed by the European Union on its member states considerably affect the result.
Nonetheless, Desmond Lachman, a senior fellow at the American Enterprise Institute, is a former deputy director of the International Monetary Fund’s Policy Development and Review Department, believes that Trump’s “tariffs on steroids” strategy could fuel inflation and potentially push the global economy into recession.
