Trump slaps tariffs on Mexico, Canada and China in opening salvo of trade war

Canadian Prime Minister Justin Trudeau has responded with punitive measures against $170 billion in US exports in response to Donald Trump dropping 25 per cent tariffs against Canada, China and Mexico.

American and Canadian flags fly at the Ambassador Bridge border crossing in Windsor, Ontario.

The White House on Saturday announced a wave of tariffs against Mexico, Canada and China, marking the first major levies of President Trump’s second term and laying the groundwork for a continental trade war.

Effective Tuesday, the US will impose a 25 per cent levy on imports from Canada and Mexico, a 10 per cent tariff on energy products from Canada, and an additional 10 per cent tariff on China.

The tariffs will be imposed under emergency economic authority never before used for tariffs “because of the major threat of illegal aliens and deadly drugs killing our Citizens, including fentanyl,” Trump posted on his Truth Social platform.

The Canadian government was notified earlier in the day about the tariffs after weeks of frantic negotiations.

Canadian Prime Minister Justin Trudeau said: “We did not want this, but Canada is prepared.”

“Tonight, I am announcing Canada will be responding to the US trade action with 25 per cent tariffs against $CD155 billion (AU$172 billion) worth of American goods,” Mr Trudeau said at a press conference in response to the measures.

“This will include immediate tariffs on $C30 billion (AU$33bn) worth of goods as of Tuesday, followed by further tariffs on $C125 billion (AU$139bn) worth of American products in 21 days’ time to allow Canadian companies and supply chains to seek to find alternatives.”

The United States has confirmed that it intends to impose 25% tariffs on most Canadian goods, with 10% tariffs on energy, starting February 4.
 
I’ve met with the Premiers and our Cabinet today, and I’ll be speaking with President Sheinbaum of Mexico shortly.
 
We did…

— Justin Trudeau (@JustinTrudeau) February 2, 2025

There will be no exemptions to the tariffs, a senior administration official told reporters on Saturday, and the duties will be in place until the White House is satisfied that the trading partners have scrubbed out the illicit fentanyl tracking into the US.

The tariffs also include a retaliation clause that will increase penalties if the trading partners strike back at the US with tariffs, the official said.

Canadian Prime Minister Justin Trudeau has responded by imposing tariffs on $170 billion in US exports.

The US also will suspend what is known as the “de minimis” loophole for Canada, which allows shipments valued under $800 to enter the country duty-free, because of concerns that those packages weren’t being properly inspected under the exemption.

Mr Trudeau said the decision was an affront to the lasting relationship between the two North American countries.

“From the beaches of Normandy to the mountains of the Korean Peninsula, from the fields of Flanders to the streets of Kandahar, we have fought and died alongside you,” Trudeau said.

“During your darkest hours during the Iranian hostage crisis, those 444 days, we worked around the clock from our embassy to get your innocent compatriots home.

“During the summer of 2005 when Hurricane Katrina ravaged your great city of New Orleans, or mere weeks ago, when we sent water bombers to tackle the wildfires in California, we were always there for you.”

Mexico’s government wasn’t formally notified of the US measures, even after the White House released its fact sheet outlining its unilateral tariffs, said one Mexican official.

Mexican President Claudia Sheinbaum also posted on social media, accusing the White House of engaging in “slander” for alleging that Mexico’s government is allied with criminal groups. She said Mexico would retaliate with tariff and non-tariff measures.

Soon after the tariffs were announced, China’s Xinhua News Agency quoted previous statements from its foreign and commerce ministries saying trade wars aren’t beneficial to either country or the world.

The US imported about $418.6 billion in goods from Canada in 2023, according to Census Bureau data.

Of that, imports of crude oil, natural gas, electricity and other energy-related products accounted for at least $106 billion that year.

The administration didn’t immediately specify the tariff codes covered by the 10 per cent energy duty. In 2023, the nation imported $475.2 billion in goods from Mexico.

Trump for weeks has threatened to impose tariffs on Canada, Mexico and China over the illicit fentanyl trade, and his team had been negotiating with their North American counterparts to potentially avoid the levies.

A senior administration official said Saturday that negotiations with Canada and Mexico would continue, but appeared to set a high bar for any tariff reductions.

The “best metric” for progress, the official said, would be that Americans “stop dying” from illegal fentanyl and that migration and broader criminal activity at US borders is “dramatically reduced”.

The latest data show overdose death numbers declining rapidly from pandemic highs.

There were 89,740 US overdose deaths in the 12 months ending in August, down nearly 22 per cent from the prior 12-month period, according to Centers for Disease Control and Prevention projections.

Trudeau was made aware Saturday that the Trump administration was moving ahead with the tariffs, said Ontario Premier Doug Ford.

US Commerce secretary nominee Howard Lutnick made the call to the Canadian government, Ford said, citing Trump’s concerns with fentanyl coming across the border.

Speaking in the Oval Office on Friday, the president suggested the Mexico-Canada-China tariffs would just be the beginning, pledging that the US would impose tariffs on computer chips, pharmaceuticals, steel, aluminium, copper, oil and gas imports as soon as mid-February.

US President Donald Trump.

“That’ll happen fairly soon,” Trump told reporters, adding that he also wants to hike tariffs on the European Union, which has “treated us so horribly,” though he didn’t specify when or how high the duties would be.

A representative for the European Union didn’t respond to a request for comment.

The announcement for those sector-based and EU tariffs appeared separate from the duties on Mexico, Canada and China.

The duties previewed by Trump would come on top of existing tariffs on those products, he said, waving away any concern about the levies increasing inflation or snarling global supply chains.

“I think there could be some temporary, short-term disruption and people will understand that,” Trump said.

“The tariffs are going to make us very rich and very strong.”

The actions mark the first time the International Economic Emergency Powers Act has been used to impose tariffs, said Barry Appleton, an international trade lawyer and co-director of the New York Law School’s Center for International Law.

President Richard Nixon used a precursor to the law to impose 10 per cent tariffs on all imports in 1971.

The act gives Trump broad powers and makes it difficult for Congress to overturn the decision, Appleton said, noting that legal challenges are likely, particularly on whether the measures are genuinely linked to fentanyl trafficking.

“However, courts have historically deferred to presidential authority,” he said.

Trump’s team was in negotiations over how to potentially dial back tariffs on those countries from the across-the-board version the president has pledged, but officials had warned that Trump may still decide to go through with a full-throated approach.

Trump told reporters in the Oval Office that there was nothing Canada, Mexico and China could do to avoid the tariffs before Saturday.

Trump’s decision to avoid carve-outs showed he is willing to take on economic risk in pushing other nations to adhere to his policy demands.

For weeks, large US industries such as the oil and automotive sectors have lobbied him for exemptions from the tariffs, warning of higher prices and continental-wide supply-chain issues, while Canada and Mexico have prepared a list of retaliatory measures to hit US products with tariffs in kind.

Trump advisers have considered exemptions for oil imports and automobiles that comply with the US-Mexico-Canada Agreement, the updated Nafta deal that Trump negotiated and signed in his first term.

This round of Trump tariffs could cover more trade in dollar value than his first-term duties on China.

Trump’s four tranches of tariffs on Chinese goods in 2018-19 covered imports valued at roughly $360 billion at the time.

New tariffs on Canada and Mexico plus additional tariffs on China would – if all items are subject to the action – cover imports valued at more than $1.3 trillion in 2023.

Canada and Mexico combined supplied about 28 per cent of US imports in the first 11 months of 2024, according to Census Bureau data. China accounted for an additional 13.5 per cent.

A woman walks toward Mexico at the Otay Mesa Port of Entry, on the US-Mexico border.

US Customs and Border Protection reported that last fiscal year 21,148 pounds of fentanyl was seized at the southwest border, the most from US citizens coming through legal ports of entry.

On the northern border, CBP reported seizing 43 pounds of the drug.

Throughout the process, Mexican and Canadian officials expressed frustration that they don’t know what actions would satisfy Trump’s demands, despite weeks of meetings between senior officials.

Mexican Economy Minister Marcelo Ebrard said a 25 per cent duty on Mexican goods would have a multibillion-dollar impact on US consumers, affecting millions of households, adding that tariffs would also raise prices of fresh fruit and vegetables, meat and beer.

This week, the United Steelworkers, a powerful union with many members who voted for Trump across the industrial Midwest, called on Trump to back away from across-the-board tariffs.

Behind closed doors, the steelworkers union has stressed the importance of Canadian oil to many of its members, pointing out that about 30,000 steelworkers are employed by oil refineries that use Canadian crude – oil that could be replaced by imports from other countries, including Venezuela, if Canadian oil becomes too expensive.

The union on Saturday criticised Trump’s tariffs, saying that while it supports rebalancing trade with Canada and Mexico, it would prefer a “targeted” tariff approach on certain products, rather than “sweeping actions that undermine crucial relationships”.

While the US, Canada and Mexico have a standing free-trade agreement, it isn’t clear that the expected tariff action would immediately violate that pact. The US-Mexico-Canada Agreement, like most trade pacts, includes a provision that allows for the imposition of tariffs on national-security grounds.

But some veterans of the USMCA talks say Trump’s tariff move strikes them as an abuse of that loophole.

The national security emergency exception was meant for “break glass” scenarios, one person involved in the negotiations said, and if it is invoked at “the drop of a hat,” the overall pact is undermined.

Natalie Andrews and Anthony DeBarros in Washington contributed to this article.

The Wall Street Journal