Trump Confirms Canada, Mexico 25% Tariffs on Saturday

President Donald Trump announced he plans to impose a 25% tariff on imports from Canada and Mexico starting February 1, 2025. However, he stated no decision has been made yet on whether the tariffs would apply to oil from these countries.

Speaking in the Oval Office, Trump explained the tariffs aim to address issues such as undocumented immigration, fentanyl trafficking at the borders, and trade deficits with neighbouring nations.

He also hinted at additional tariffs on China, mentioning a potential 10% rate, though he did not provide further details. “China is sending fentanyl into our country, which is causing hundreds of thousands of deaths,” Trump said. “Because of that, they’ll face a tariff too, and we’re working on it now.”

During his campaign, Trump suggested tariffs as high as 60% on Chinese goods but initially delayed taking action. Instead, he ordered his administration to review the matter. Imports from China have levelled off since 2018, partly due to the escalating tariffs imposed during Trump’s first term.

Earlier this month, a senior Chinese official, Vice Premier Ding Xuexiang, addressed trade concerns at the World Economic Forum in Davos. While he avoided directly naming the US, he emphasized the need for a balanced resolution and highlighted China’s intention to expand imports.

Canada and Mexico have warned they will respond with countermeasures if the US moves forward with the tariffs. Both countries have also sought to assure Washington they are addressing US border concerns.

If oil imports from Canada and Mexico are taxed, it could conflict with Trump’s commitment to lowering living costs. Tariffs, which are taxes on imported goods, often raise prices for consumers and businesses. While the goal is to encourage buying domestic products, taxes on imported oil could lead to higher costs for fuel, food, and other essentials.

Currently, about 40% of the crude oil processed by US refineries is imported, with most of it coming from Canada.

Canada Threatens Tit for Tat Tariffs

Canada’s Foreign Minister Mélanie Joly, in a conversation with the Financial Times, cautioned that a potential 25% tariff on Canadian imports proposed by the U.S. President would directly affect everyday people if trade tensions escalated into a full-blown conflict.

“We sell oil to the U.S. at a discounted price, where it’s refined in Texas. If it’s not us, the alternative is Venezuela,” Joly explained, pointing out the reliance of U.S. refineries on heavy crude produced in Canada and Venezuela. She added, “There are no other realistic options, and this administration has no interest in working with Venezuela.”

The U.S. had previously imposed broad sanctions on Venezuela during the President’s first term, limiting its ability to supply oil to American refineries.

Joly was in Washington, D.C., leading a final effort by Canada to prevent the first trade war of the President’s new administration. The threat of imposing steep tariffs on Canadian and Mexican goods, starting February 1, loomed large. The President indicated he might exclude oil from these tariffs, acknowledging the U.S.’s significant energy imports from its northern neighbour.

Despite the growth in domestic shale oil production in regions like Texas, Canada remains a key energy supplier, accounting for about 20% of the oil consumed in the U.S. and around 60% of its imported crude. Many American refineries are optimized for the heavier oil grades produced in Canada and Venezuela, not the lighter varieties from domestic shale production.

Canada and Mexico United

During her visit, Joly met with U.S. Secretary of State Marco Rubio and other officials. She also reached out to lawmakers, highlighting the potential fallout for communities, particularly in Republican-led states, if trade tensions escalated.

“This isn’t what we want,” Joly said. “We’re looking for a solution that works for both sides, and we believe that’s achievable.”

In preparation for possible tariff measures, both Canada and Mexico have reportedly created lists of retaliatory tariffs targeting U.S. goods. Sources familiar with the situation previously shared this information with the Financial Times. Jonathan Wilkinson, Canada’s energy minister, pledged similar countermeasures, including tariffs on products like U.S. steel and orange juice, should the threats materialize.

When asked if retaliation had come up in her discussions with U.S. officials, Joly said it hadn’t. “Definitely not,” she clarified.

She emphasized Canada’s independence, stating, “We can be close allies, even best friends, but we’ll never be a state or a colony. That’s non-negotiable.”

Canada and Mexico have also worked to address U.S. concerns about border security, a recurring topic in the President’s rhetoric connecting illegal drug and migrant crossings to trade disputes. “We’re making progress on border issues,” Joly noted, mentioning her planned meeting with the President’s border advisor, Tom Homan.

In response to U.S. concerns, Canada has committed $1 billion to bolster border security. Recent efforts include deploying Black Hawk helicopters, additional K-9 units, and 60 drones. These measures aim to address not only U.S. concerns but also Canada’s worries about illegal firearms and undocumented migrants crossing the border.

“We’ve taken steps to strengthen our side of the border as well,” Joly said, pointing to Canada’s efforts to address the flow of illegal guns and the possibility of increased migration due to U.S. deportation policies.

The President’s threats to deport millions of undocumented immigrants have sparked fears that some may head to Canada for refuge.

While the proposed 25% tariffs were tied to border security in initial discussions, Joly clarified that any broader review of trade, including the North American trade agreement signed by the President during his previous term, would take place through separate negotiations.

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