Trump Imposes Sweeping Tariffs: 25% on Canada and Mexico, 10% on Canadian Energy
February 1st, 2025, President Donald Trump imposed a 25% tariff on imports from Canada and Mexico, with an additional 10% tariff on imports from China. He specified that shipments of Canadian oil to the United States would be 10%. In a fact sheet released by the White House, the President declared a national emergency under the International Emergency Powers Act (IEEPA). The sheet read, "Until the crisis is alleviated, President Donald J. Trump is implementing a 25% additional tariff on imports from Canada and Mexico and a 10% additional tariff on imports from China. Energy resources from Canada will have a lower 10% tariff."
The White House cited their reasoning for invoking International Emergency Economic Powers Act (IEEPA) and levying these tariffs on the "extraordinary threat posed by illegal aliens and drugs, including deadly fentanyl." These tariffs are set to take effect on Tuesday February 4th, and specifies that this tariff will "remain in effect until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop this Invasion of our Country!” There is also a specific retaliation clause, stating:
"Should Canada [Mexico or China] retaliate against the United States in response to this action through import duties on United States exports to Canada or similar measures, the President may increase or expand in scope the duties imposed under this order to ensure the efficacy of this action."
We can expect Canada and Mexico will now move forward with a series of retaliatory tariffs in response. President Trump is set to be speaking with Canadian Prime Minister Trudeau later this evening. A White House official told reporters on Saturday that the executive orders would also contain a retaliation clause, so that if a country tried to retaliate with tariffs on U.S. products, it would face tariffs.
Impact on Industry
The agricultural sector stands to be among the hardest hit. The United States imports over $75 billion worth of agricultural products from Canada and Mexico annually, including $34 billion worth of fruits and vegetables from Mexico and $10 billion from Canada. U.S. farmers, many of whom rely on exports to these same trading partners, could face retaliatory tariffs that further disrupt their supply chains and market access.
Whether tariffs flow through to consumer prices will be a central variable that determines how Trump’s trade policy plays out, according to Paul Donovan, chief economist of UBS Global Wealth Management.
“How quickly would US consumers experience higher prices? Oil and food prices would likely react within a month. US stock levels determine the timing of other price increases. Second-round price increases also matter. These tariffs partially relate to the war on drugs, but if the political focus shifts to broader inflation perceptions, the duration of any taxes could be short. US egg prices (a campaign focus) have soared since Trump was elected — food prices rather than drug prices may matter mo re.”
The auto industry is also at risk. The U.S. imported more than $126 billion worth of automobiles and auto parts from Mexico and $46 billion from Canada last year. The American Automotive Policy Council, representing major manufacturers like Ford, GM, and Stellantis, has urged the administration to exempt vehicles that meet the U.S.-Mexico-Canada Agreement’s (USMCA) trade compliance standards.
The Political & Economic Fallout
Economists largely predict that these tariffs will hurt the U.S. economy as opposed to protecting industry like the President has suggested. A Moody’s analysis estimated that Trump’s tariff policies could lead to a loss of 675,000 U.S. jobs and raise the unemployment rate by 0.4%. The Tax Foundation found that previous tariffs imposed during Trump’s first term were ultimately paid by U.S. businesses, further straining economic growth. Goldman Sachs projected that a 1% increase in the effective tariff rate would raise consumer prices by 0.1% and contribute to inflation.
In addition to the 25% tariffs on Canada and Mexico, Trump has signaled potential broader trade actions, including a universal import tariff starting at 2.5%, with the possibility of further increases. This strategy echoes his prior threats of a 10% across-the-board tariff and a 60% tariff on Chinese goods, a move that economists warn could push the U.S. economy into a recession.
Trump has directed federal agencies, including the Treasury Department and the Department of Commerce, to explore an “America First trade policy” with recommendations due by April 1. This suggests that even more aggressive tariff measures could be on the horizon, adding uncertainty to global trade markets and domestic economic stability.
Reactions & Retaliation from Trade Partners
Both Canada and Mexico have vowed to retaliate with their own tariffs should Trump’s plan go into effect. Such countermeasures would put U.S. exporters—particularly farmers and manufacturers—at a disadvantage, making it more expensive for American businesses to sell goods abroad.
Additionally, China remains a key concern. Trump has accused Beijing of failing to curb fentanyl exports and has hinted at new tariffs, though he has not specified their scope or timeline. The uncertainty surrounding these potential sanctions further complicates trade relations and raises concerns about supply chain disruptions.