U.S. President Donald Trump on Saturday (February 1) will implement tariffs of 25% on Canadian and Mexican imports and 10% on Chinese goods with immediate effect, according to White House officials, Reuters reports.
Trump has repeatedly warned Mexico and Canada - two of the United States' top trading partners - he will impose tariffs if the two countries do not end shipments of fentanyl and the flow of migrants across U.S. borders.
The announcement of tariffs may roil financial markets and strain the U.S. relationship with its top two trading partners.
Trump's punitive duties and retaliatory tariffs from Canada and Mexico threaten to disrupt nearly $1.6 trillion in North American trade and effectively end a 30-year free trade system that has deeply integrated the three economies.
The U.S. president said on Thursday (January 30) he still is considering an additional 10% on Chinese imports to punish Beijing for its alleged role in the fentanyl trade.
Gary Hufbauer, a nonresident senior fellow at the Peterson Institute for International Economics (PIIE), said these tariffs could be postponed should Canada and Mexico take "sufficiently dramatic symbolic" actions on the fentanyl and immigration issues.
He suggested that what Trump might really want is an increased presence in border security from both Canada and Mexico and more efforts to combat drug trafficking. He stated that such actions would be "good news" for the president, whereas the tariffs and potential retaliation could lead to "bad news."
Trump hinted about possible exemptions on Thursday when he said he would soon decide whether to apply the tariffs to imports of Canadian and Mexican oil, an indication that he may be concerned about their impact on gasoline prices. Crude oil is the top U.S. import from Canada and among the top five from Mexico, according to U.S. Census Bureau data.
"If you don't take in Mexican and Canadian oil, it's a very heavy grade they both produce, and the refineries in Houston are engineered to that grade," Hufbauer said. "And you don't quickly change the grade of oil that goes in on one end and then comes out as gasoline and aviation fuel on the other end. It costs millions and millions of dollars to change the intake of oil."
Trump was expected to invoke the International Emergency Economic Powers Act (IEEPA) as the legal basis for the tariffs, declaring a national emergency over fentanyl overdoses that killed nearly 75,000 Americans in 2023 and illegal immigration, according to two sources familiar with the matter.
IEEPA, enacted in 1977 and modified after the Sept. 11, 2001 attacks on the U.S., gives the president broad powers to impose economic sanctions in a crisis.
Among the trade law tools at Trump's disposal, it would give him the fastest path to imposing broad tariffs, as others require lengthy investigations by the Commerce Department or Office of the United States Trade Representative (USTR).
Economists and business executives have warned that the tariffs would spark major increases in the prices of imports such as aluminum and lumber from Canada, fruits, vegetables, beer and electronics from Mexico and motor vehicles from both countries.
Tariffs are paid by firms that import goods and pass the costs on to consumers or accept lower profits, economists say.
