US President Donald Trump announced that 25% tariffs on goods from Mexico and Canada would take effect Tuesday, March 4, 2025. This decision has stirred concerns about a potential trade conflict in North America, adding pressure on inflation and economic growth.
“Starting tomorrow—25% tariffs on Canada and Mexico. That’s happening,” Trump told reporters in the Roosevelt Room. “They’re going to face tariffs.”
Trump stated the tariffs aim to push Mexico and Canada to address fentanyl trafficking and illegal immigration. He also mentioned balancing trade and encouraging factories to move back to the U.S.
He also revealed plans to impose a 10% tariff on goods from China, escalating tensions in ongoing trade disputes. Currently, imports from China already face tariffs of at least 10%, following an earlier order from Trump this month.
China’s foreign ministry strongly opposed the announcement, stating their dissatisfaction and firm rejection of the new measures.
The announcements caused the S&P 500 index to drop by 2% during Monday afternoon trading, reflecting market concerns over rising inflation and the potential breakdown of long-standing trade partnerships with Mexico and Canada.
Tariff on Chinese imports
Despite the risks, the administration remains firm that tariffs are essential for strengthening U.S. manufacturing and attracting foreign investments. Commerce Secretary Howard Lutnick highlighted that companies like TSMC, a major computer chip producer, expanded operations in the U.S. due to similar tariff measures.
Earlier this year, Trump imposed a 10% tariff on Chinese imports, which is set to double to 20% on Tuesday. He had delayed the increase for a month to allow Mexico and Canada time to offer concessions.
However, on Monday, Trump declared there was no more room for negotiation. The new tariffs will also include a 10% rate on Canadian energy products such as oil and electricity.
“If these tariffs happen, we’re ready,” said Canadian Foreign Minister Mélanie Joly. She noted Canada has prepared $155 billion in retaliatory tariffs, including an initial $30 billion rollout.
Joly explained that Canada has a robust border plan and had discussed this with U.S. officials last week. Diplomatic talks are still ongoing, she added.
Mexico and Canada Complying
Mexican President Claudia Sheinbaum said her country has plans in place and is united in its response. She emphasized that Mexico would act based on the U.S. government’s decision but refrained from further speculation.
Both Mexico and Canada have taken steps to address Trump’s concerns. Mexico deployed 10,000 National Guard troops at its border to curb drug trafficking and illegal immigration.
Canada appointed a special official to tackle fentanyl smuggling, though the issue is relatively minor compared to trafficking from other regions.
As recently as Sunday, it was unclear what specific tariff rates Trump would settle on. Commerce Secretary Lutnick described the situation as “fluid,” noting that final decisions would come from Trump and his team.
Meanwhile, Treasury Secretary Scott Bessent revealed that Mexico had offered to impose its own 20% tariffs on Chinese imports during discussions with the U.S. Bessent argued that China, not U.S. businesses or consumers, would bear the cost of these tariffs.
However, companies including Ford and Walmart have raised concerns about the financial strain tariffs could place on their operations. Studies from the Peterson Institute for International Economics and Yale University also suggest these tariffs could increase costs for an average family by over $1,000 annually.
Trump is also set to implement “reciprocal” tariffs in April. These will match rates imposed by other nations, including subsidies and value-added taxes.
Additionally, the president has removed exemptions for steel and aluminium tariffs introduced in 2018. New tariffs will also target cars, computer chips, copper, and pharmaceuticals.
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