Trump signs order imposing tariffs on Canada, Mexico and China

President Donald Trump on Saturday imposed tariffs on imports from Canada, Mexico and China, the nation’s three largest trading partners, invoking emergency economic powers in a high-stakes bid to compel them to crack down on illegal immigration and drugs reaching the United States.

The president signed three executive orders establishing the measures, the first official actions of his second-term trade war, according to a White House official who briefed reporters.

They drew immediate opposition from business and labor groups, who warned of profound upheaval throughout the economy. For the typical U.S. household, the tariffs will mean a loss of about $1,200 in annual purchasing power, according to the Budget Lab at Yale University, a nonpartisan research center.

Effective Tuesday at 12:01 a.m. Eastern time, American importers will pay a new 25% tax on goods from Canada and Mexico and a 10% levy on products from China, the president said. Most products from Canada and Mexico currently face no tariffs, under a trade deal Trump signed during his first term, while many Chinese goods incur taxes of up to 25%. The new tariffs are in addition to those fees.

Energy products, including crude oil from Canada, will suffer a 10% charge.

If any of the three countries retaliate with their own tariffs on U.S. exports – as is likely – the president threatened to increase the applicable tariff rate in response.

“A Nation without borders is not a nation at all. I will not stand by and allow our sovereignty to be eroded, our laws to be trampled, our citizens to be endangered, or our borders to be disrespected anymore,” the president wrote.

The president claimed that Chinese fentanyl shipments make their way to the United States via Mexico and Canada because those two nations fail to adequately police their borders. He criticized the Chinese government for breaking its promises to reduce fentanyl output and accused the ruling Chinese Communist Party of having “subsidized and otherwise incentivized” companies to ship fentanyl and related chemicals to the United States.

In blunt and almost hostile terms, Trump also assailed two of the closest U.S. allies for their role in facilitating the drug trade.

Canada’s failure to take tougher action against fentanyl operations, he said, constituted an “unusual and extraordinary threat” to the United States while the Mexican government maintained “an intolerable alliance” with the drug cartels in that country.

The tariffs will remain in place until the president determines that the three countries have taken sufficient action to address the U.S. complaints. “In Donald Trump’s golden age, we will have only legal immigration and we will have zero Americans dying from Chinese/Mexican/Canadian fentanyl,” the White House official said.

The president also suspended de minimis rules for Canada that allow small packages valued at less than $800 to enter the United States on a duty-free basis, which officials have said is another route for illicit drugs to reach U.S. streets.

U.S. companies and consumers last year purchased from the three countries about $1.3 trillion worth of merchandise, including food, electronics, cars and car parts, and clothing, according to the Census Bureau.

Representatives of business and labor were quick to object to the president’s dramatic actions.

“The USW has long called for systemic reform of our broken trade system, but lashing out at key allies like Canada is not the way forward,” said David McCall, president of the United Steelworkers union. “These tariffs don’t just hurt Canada. They threaten the stability of industries on both sides of the border.”

The National Foreign Trade Council and the Consumer Brands Association warned of higher prices for everyday products. Mexico is the top provider of imported beer while Canada supplies nearly 60% of U.S. crude oil imports.

The new tariffs “will inject massive costs into our inflation-weary economy while exposing us to a damaging tit-for-tat tariff war that will harm key export markets that U.S. farmers and manufacturers need,” said Steve Lamar, president of the American Apparel and Footwear Association.

The sweeping presidential actions were welcomed, however, by longtime critics of U.S. trade policies that concentrated on removing barriers to cross-border commerce.

“President Trump’s decision to impose universal tariffs is a bold and necessary step toward reversing decades of failed trade policies and rebuilding America’s manufacturing and agricultural industries,” said Zach Mottl, chairman of the Coalition for a Prosperous America.

Saturday’s actions focused on Trump’s concerns about illegal immigration and drugs flowing across U.S. borders. But his complaints about Canada and Mexico are far broader.

In the past, he has lashed out over the large U.S. trade deficits with each country and suggested that steep U.S. tariffs would spur manufacturers to make their products in the United States with American workers rather than ship them here from abroad.

Many economists are skeptical. In Trump’s first term, factory employment rose by 462,000 before flatlining in the year before the pandemic.

Trump’s abrupt imposition of steep tariffs on goods moving across U.S. borders threatens significant disruption for regional supply chains that have become deeply intertwined over the past three decades. The auto industry in particular could encounter tremendous turbulence.

There is no provision in the president’s orders for companies to seek an exemption from the tariffs for items that are unavailable from suppliers outside of North America, according to the White House official, who spoke on the condition of anonymity to share details on the orders.

Apart from the tariffs’ economic impact, Trump’s action is notable for calling into question one of the signature achievements of his first term in office: the United States-Mexico-Canada Agreement (USMCA).

By placing tariffs on Canada and Mexico, Trump is effectively ripping up that deal, which replaced the North American Free Trade Agreement (NAFTA) and took effect less than five years ago. Trump initially proclaimed his NAFTA rewrite “the most modern, up-to-date, and balanced trade agreement in the history of our country.”

The agreement included a provision for the three countries to review the deal on July 1, 2026, make recommendations for its improvement or begin a 10-year countdown to ending the pact.

Saturday’s tariffs may be just a negotiating tactic, designed to wring concessions over border controls from Mexico and Canada, many Wall Street analysts believe.

Canadian officials have for several months been engaged in a diplomatic effort to stave off the levies and to safeguard the $900 billion in trade that crosses the border each year. Trump’s tariffs could shrink the Canadian economy by 2.6%, economists said.

Top cabinet ministers met this week with U.S. officials, including Secretary of State Marco Rubio, to argue that they have addressed border concerns.

Canada in December unveiled a $900 million border security plan, which includes an aerial surveillance task force, Black Hawk helicopters and drones. Officials texted videos of border operations to their U.S. counterparts, and Alberta Premier Danielle Smith invited a Fox News crew to the border this week.

But on Friday evening, after meeting with Tom Homan, Trump’s “border czar,” Canadian officials said at a Washington news conference that they do not believe the tariffs are about the border.

The Mexican government did not respond directly to the tariff announcement. But President Claudia Sheinbaum, appearing at a public event, said, “When we talk to other nations, it’s always with our head high, never bowing our head. We are equal to all the other nations in the world.”

Gabriela Siller, director of economic analysis for the BASE Financial Group, said on the social media site X that Mexico’s GDP could shrink 4%, if Trump’s tariffs are in place for all of 2025.

Since USMCA went into effect, U.S. trade with Mexico has grown especially fast.

U.S. reliance on Mexico as a source of imports has increased over the past several years. Through November 2024, almost 16% of the $3 trillion in merchandise that the United States purchased from other countries came from Mexican factories, according to Census Bureau data.

In 2017, before Trump’s first tariffs on Chinese products began reshaping global supply chains, about 13% of imports came from Mexico.

IBC Bank in Laredo, Texas, which specializes in servicing cross-border commerce, has seen its assets grow by more than $3 billion, or 27%, since the new agreement took effect.

From his office window, Gerald Schwebel, the bank’s executive vice president, can see the steady flow of trucks carrying goods back and forth between the United States and Mexico, little more than five miles away. On the other side of the bank’s headquarters, freight trains belonging to the Canadian Pacific Kansas City Railway haul grain, lumber, fuel, chemicals, steel, cement, cars, food and appliances along a corridor that links the three nations.

Before NAFTA took effect in 1994, the unemployment rate in Laredo topped 10%. It’s hovered around 4% for the last few years, according to the Bureau of Labor Statistics.

“Laredo is a prime example of the benefits of North-South trade as a result of USMCA and NAFTA,” Schwebel said.

Indeed, jobs in the city – home to the nation’s largest inland port – have grown slightly faster than the national average since the new trade deal was implemented.

In other respects, USMCA has been less impressive.

Robert E. Lighthizer, Trump’s first-term trade negotiator, designed the deal to promote more domestic manufacturing than its predecessor.

Tougher “rules of origin” required 40% of passenger cars to contain parts produced by workers making an hourly wage of at least $16, far more than Mexican factories pay.

The most recent International Trade Commission assessment in 2023 found, however, that the new rules “had a negligible impact on GDP and aggregate employment in the U.S. economy.”

In the treaty’s first 2½ years, only 35 new jobs in U.S. vehicle production were created, the ITC said.

For Trump administration officials, including Rubio, a key concern is the growing presence in Mexico of Chinese manufacturers. Many are there to serve Mexican customers. But U.S. officials worry that some Chinese company, especially makers of electric vehicles, may hope to use Mexico as a tariff-free backdoor to the U.S. market.

As the first North American trade war begins, some analysts say Mexico and Canada stand to lose more than the United States. The impact on those economies of a three-way tariff conflict could be several times larger than in the United States, which is much less dependent on trade, according to an analysis by S&P Global Ratings.

Mexican manufacturers in the auto and electrical equipment sectors could see significant output declines once tariffs take hold, according to a S&P Global Ratings analysis.

In Canada, the biggest losers are likely to be makers of paper products, rubber and plastics.

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Valentina Muñoz Castillo in Mexico City contributed to this report.