President Donald Trump announced that a 25% tariff on goods from Canada and Mexico is set to take effect on March 4, 2025. He also revealed plans for an additional 10% tax on Chinese imports, escalating tensions with some of the U.S.’s biggest trading partners.
Earlier, on February 3, Trump temporarily paused the tariffs on Canada and Mexico for one month after both nations introduced new border security measures. However, recent comments from Trump suggested uncertainty about whether the tariffs would proceed after the grace period.
On Thursday, Trump took to social media, stating that drugs from Canada and Mexico were still entering the U.S. at “very high and unacceptable levels.”
“We cannot allow this scourge to continue to harm the USA, and therefore, until it stops, or is seriously limited, the proposed TARIFFS scheduled to go into effect on MARCH FOURTH will, indeed, go into effect, as scheduled,” the president wrote. “China will likewise be charged an additional 10% Tariff on that date.”
The new tariffs on China will add to a 10% duty that began earlier this month, coinciding with the temporary delay on Canadian and Mexican tariffs. The 25% levy will apply to most Canadian and Mexican goods, excluding Canadian energy products, which will face a 10% tariff instead.
“It’s 10 plus 10, a second 10,” Trump said from the Oval Office on Thursday. He added, “I think you’ll see drugs being stopped because these countries shouldn’t allow them to enter the United States. We won’t let it happen any more.”
This move raises the risk of a trade war with Canada, Mexico, and China, which economists warn could slow U.S. growth, fuel inflation, and even trigger recessions in Canada and Mexico. Without a last-minute resolution, these tariffs could impact over $1 trillion worth of imports starting March 4.
Canada’s loonie drops
Financial markets reacted quickly to Trump’s announcement. The U.S. dollar surged, while Canada’s loonie, Mexico’s peso, and China’s offshore yuan all lost value. The S&P 500 dropped 1.6% as investors worried about the economic fallout.
During a cabinet meeting Wednesday, Trump appeared to mix the North American tariffs, linked to drug and migration issues, with separate global reciprocal duties his administration is planning.
“The April Second Reciprocal Tariff date will stay in full force,” Trump wrote in another social media post on Thursday.
A White House official, speaking anonymously, said Trump remains frustrated with Canada and Mexico’s border security measures, feeling most improvements have come from the U.S. side.
The administration is now evaluating U.S. overdose deaths as a measure of Canada and Mexico’s efforts. While Trump seems determined to impose the tariffs, the official didn’t rule out a potential deal before March 4.
When asked in the Oval Office if he was satisfied with the progress, Trump replied, “Not at all.”
The tariffs on China are partly tied to its alleged involvement in fentanyl trafficking. The U.S. Drug Enforcement Administration claims much of the illegal fentanyl smuggled through Mexico uses components sourced from China.
Chinese officials have dismissed these accusations, calling them an excuse for tariffs.
Chinese Commerce Minister Wang Wentao sent a letter to U.S. Trade Representative Jamieson Greer on Thursday, objecting to the tariffs.
Meeting with Tom Homan
Trump’s announcement is expected to intensify lobbying efforts by Canada and Mexico to prevent the tariffs. Concessions from Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum previously persuaded Trump to delay the tariffs.
Canadian officials, including Public Safety Minister David McGuinty and Transport Minister Anita Anand, travelled to Washington this week to argue against the tariffs. They reportedly planned to meet with Tom Homan, Trump’s border advisor.
“We are confident that the steps we’ve taken should meet the U.S. administration’s expectations,” McGuinty said Thursday in Washington.
Canada has allocated $901 million to enhance border security, while Mexico has deployed 10,000 National Guard troops to its border to curb the flow of fentanyl and migrants. On Wednesday, Sheinbaum said she was ready to speak with Trump if necessary to prevent the tariffs.
Both countries have signalled their willingness to negotiate, but have also warned of retaliation. “If unfair tariffs are imposed on Canada next week, we’ll respond immediately and strongly,” Trudeau said Thursday, adding that his government is prepared to target $107 billion worth of U.S. goods. “But that’s not what we want. A trade war isn’t in anyone’s best interest.”
Cross Border Trade
The U.S., Canada, and Mexico have closely integrated supply chains, covering industries like agriculture and manufacturing. New tariffs could destabilize the trade agreement Trump signed during his first term.
In 2023, U.S.-Canada trade reached $920 billion, while U.S.-Mexico trade was about $900 billion, according to U.S. government data.
Trump had initially been cautious with China, the third-largest U.S. trading partner, expressing a desire to reach a deal with Beijing. But his latest tariff plans and additional investment limits on key products like semiconductors threaten to worsen relations.
Meanwhile, Chinese President Xi Jinping has urged his officials to stay calm in the face of U.S. measures, hinting at a more measured response for now.
Higher tariffs may lead to rising consumer prices in the U.S., which could backfire politically on Trump, especially since inflation remains a key concern for voters. A recent Harris poll for Bloomberg News showed 60% of Americans believe tariffs will drive prices higher, while 44% think the policies will harm the economy. Only 31% see them as beneficial.
Bloomberg Economics analysts Chang Shu, Eric Zhu, and David Qu noted that the initial 10% tariff on China would have minimal short-term economic impact. However, they warned that long-term increases, especially to 60%, could significantly hurt China’s exports to the U.S., reducing GDP by 2.3% in the medium term.
