US President Donald Trump is preparing to implement 25% tariffs on imports from Canada and Mexico, while also doubling an existing tariff on goods from China. These measures are part of his broader strategy to reshape the US economy, generate additional revenue, and renegotiate trade relationships with key partners.
The new tariffs, set to begin Tuesday, would be among the most significant of Trump’s presidency. They would apply to about $1.5 trillion in annual imports, imposing a 25% tariff on almost all goods from Canada and Mexico.
Except Canadian energy products like crude oil and natural gas, which would face a 10% rate instead. Additionally, the tariff on Chinese imports would increase to 20%.
While these tariffs could still be postponed — as similar measures on Canada and Mexico have been delayed once before — any delay is likely to be short-lived. Several other tariffs proposed by Trump are already scheduled for April.
The president has framed these actions as a way to pressure neighbouring countries to strengthen border security, particularly to curb illegal drug trafficking and fentanyl entering the US.
Canada and Mexico stepping up
Commerce Secretary Howard Lutnick acknowledged that both Canada and Mexico have taken steps to address border issues. However, he noted that fentanyl remains a major concern, and the tariffs are connected to resolving this issue.
Speaking on Fox Business News, Lutnick said Trump is weighing his options regarding how to proceed with the tariffs on Canada and Mexico.
“There are going to be tariffs on Tuesday,” Lutnick said. “Exactly what they’ll look like will depend on what the president and his team decide.”
The tariffs could help offset the cost of tax cuts Trump wants to implement, while also dispelling claims that his tariff threats are empty gestures used only as bargaining tools. However, they come with risks.
Higher tariffs could disrupt supply chains across North America, particularly in the auto industry, and may worsen inflation. Legal challenges might also arise due to the USMCA trade deal renegotiated during Trump’s first term.
The US economy is already under pressure, with stock markets and cryptocurrencies experiencing losses, consumer confidence declining, and inflation persisting. A new trade war could trigger further economic instability and a broader market sell-off.
The proposed tariffs on Canadian imports exclude most energy products, which face a reduced rate of 10%. In response, Prime Minister Justin Trudeau’s Liberal government is considering a tax on oil exports that would directly impact American drivers.
It remains uncertain if such a tax will be implemented, especially as Trudeau’s tenure nears its end and the province of Alberta, that is not aligned his Net Zero energy polices, vowed to fight a tax on oil experts.
Canadian Tariffs on China
Last fall, Canada imposed 100% tariffs on Chinese-made electric vehicles and 25% tariffs on certain steel and aluminium products from China. On Sunday, Trudeau stated that Canada would respond strongly if the US moved forward with the tariffs.
“We’re prepared to take proportional action, as Canadians expect,” he said.
Trump’s proposed tariffs on Mexico would cover all imports from the country. Mexican President Claudia Sheinbaum has explored countermeasures, including potential tariffs on Chinese goods, a move US Treasury Secretary Scott Bessent has encouraged. Canada has also considered similar measures in the past.
US-Mexico discussions on security and counter-narcotics have reportedly progressed further than trade negotiations. Last week, Mexico transferred 29 alleged criminals to the US as a gesture of cooperation. Officials had hoped this would delay the tariffs and allow trade talks to continue.
Trump is also planning additional tariffs, which he could enact based on recommendations due by April 1. These include “reciprocal tariffs,” calculated based on other countries’ trade barriers, taxes, and tariff rates. It’s unclear whether the reciprocal tariffs will account for existing ones, such as those tied to Canada and Mexico’s border security efforts.
Steel and aluminium tariffs
Another set of tariffs targets specific industries. A 25% tariff on steel and aluminium is scheduled for March 12, which would significantly affect Canada and Mexico. Additional tariffs on autos, semiconductor chips, and pharmaceuticals could follow as early as April 2.
Trump has also ordered an investigation into copper imports and their potential impact on national security, which could lead to future tariffs. This week, he instructed the Commerce Department to examine the risks posed by lumber imports, with Canada likely the main target.
On Saturday, President Trump launched an investigation to assess whether lumber imports pose a risk to U.S. national security. He instructed Commerce Secretary Howard Lutnick to lead the inquiry.
The findings could give the president authority to impose tariffs on imported lumber. A White House official, however, did not specify how long the process might take.
Through an executive memo, President Trump formally initiated the investigation. Alongside it, another document outlined plans to boost the annual supply of lumber available for purchase.
According to White House officials, this move aims to stabilize timber prices and prevent significant cost increases.
In 2021, Canada supplied $28 billion worth of lumber to the U.S., representing nearly half of the total lumber imports, as per data from the U.S. International Trade Commission.
Other major suppliers include China, Brazil, and Mexico, though their contributions are much smaller in comparison. The U.S. also exported close to $10 billion in lumber to Canada and $6.5 billion to Mexico during the same year.
Flawed timber and lumber policies
White House officials noted that the U.S. has enough resources to sustain its own lumber needs. However, they argued that low-cost imports, particularly from countries like Canada, have undercut American producers. They suggested that even some allied nations have contributed to these challenges.
Peter Navarro, senior trade and manufacturing advisor, told reporters on Friday that flawed timber and lumber policies have increased housing and construction costs while fuelling large trade deficits.
He accused countries like Canada, Germany, and Brazil of flooding the U.S. market with cheap lumber.
“This ends today,” Navarro stated, highlighting the administration’s new measures to strengthen both supply and demand for American timber and lumber.
If tariffs are implemented without balancing supply, they could drive up the cost of imported lumber. Industries like construction, which rely heavily on wood, could feel the impact. The investigation will also cover related products, such as kitchen cabinets.
The move will likely spark debate over whether lumber imports genuinely threaten national security.
Critics may question if this measure is justified compared to similar investigations into materials like steel, aluminium, and copper—metals that are directly used in military applications, such as building planes and ships.
When asked about the national security angle, a White House official explained that lumber is heavily used by the military, making it a significant material.
