Washington, D.C. – President Donald Trump confirmed Thursday that he will move forward with 25% tariffs on imports from Canada and Mexico starting February 1, citing the flow of fentanyl and large trade deficits as key reasons for his decision.
“We’ll be announcing the tariffs on Canada and Mexico for a number of reasons,” Trump told reporters in the Oval Office while signing executive actions in response to a deadly airplane collision.
Reasons for Tariffs
Trump outlined three primary reasons for imposing the tariffs:
- Illegal immigration – “The people that have poured into our country so horribly and so much,” he said.
- Drug trafficking – Highlighting the influx of fentanyl and other illicit substances.
- Trade imbalances – Accusing the U.S. of providing “massive subsidies” to Canada and Mexico in the form of trade deficits.
The announcement had an immediate impact on financial markets. West Texas Intermediate (WTI) oil futures surged above $73 per barrel, the U.S. dollar erased earlier losses to hit a daily high, while the Canadian dollar and Mexican peso dropped significantly. U.S. Treasuries also pared gains following the remarks.
Tariffs Could Increase, Oil Imports Under Review
Trump suggested that the 25% tariff could be just a starting point, stating that the rates “may or may not rise with time.” However, he left open the possibility of exempting oil imports, saying he would decide by Thursday evening, depending on oil prices.
“We don’t need the products that they have. We have all the oil that you need. We have all the trees you need,” Trump remarked, referring to major imports from Canada.
Markets and Global Leaders React
Trump’s tariff threats have been closely monitored by global business and political leaders, as markets assess whether he is using tariffs as a negotiating tactic or as a firm policy shift.
Recently, Trump threatened tariffs on Colombia over deportation policies but later rescinded them, leading to speculation that he may be using trade penalties as leverage for policy concessions.
Tariffs on China Also Under Consideration
Trump also indicated plans to proceed with tariffs on China, though he did not specify a rate. Previously, he has suggested a 10% tariff on Chinese imports, accusing Beijing of failing to curb the export of fentanyl and its chemical precursors to the U.S.
“With China, I’m also thinking about something because they’re sending fentanyl into our country, and because of that, they’re causing us hundreds of thousands of deaths,” Trump said. “So China is going to end up paying a tariff, and we’re in the process of doing that.”
Trump has instructed his administration to investigate China’s compliance with a previous trade deal, potentially setting the stage for further economic penalties against the world’s second-largest economy.
Potential Trade War Looms
The decision to target Canada and Mexico, the U.S.’s largest trading partners, could have major economic consequences, disrupt markets, and escalate trade tensions. Both countries have vowed to retaliate with their own tariffs while simultaneously attempting to defuse the conflict.
“If these tariffs go into effect, Canada will respond,” said Kirsten Hillman, Canada’s Ambassador to the U.S. “This is not something that we want to do. We do not want to get into a tariff-back-and-forth with the United States. It’s not good for Canadians or Americans.”
Hillman emphasized that Canada has taken steps to enhance border security, including deploying drones and helicopters to address U.S. concerns. Meanwhile, Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum have both engaged with Trump in an attempt to prevent the tariffs from taking effect.
Economic Fallout and Industry Impact
In 2024, U.S.-Canada trade totaled $699 billion, while U.S.-Mexico trade reached $776 billion. Experts warn that imposing tariffs of this magnitude could have severe impacts on key industries, such as the automobile sector and the energy market.
Following Trump’s announcement, Ford Motor Co. and General Motors Co. saw their stock prices turn negative, erasing earlier gains.
“President Trump’s tariffs will tax America first,” said Matthew Holmes, Executive Vice President of the Canadian Chamber of Commerce. “From higher costs at the pumps, grocery stores, and online checkout, tariffs will cascade through the economy, ultimately hurting consumers and businesses on both sides of the border. This is a lose-lose.”
Further Tariffs on Other Sectors
Trump is also considering tariffs on additional sectors, including pharmaceuticals, semiconductor chips, steel, aluminum, and copper. These new levies could impact multiple countries, including Canada and Mexico, further intensifying global trade tensions.
With the February 1 deadline approaching, businesses, markets, and world leaders are bracing for major economic shifts, as Trump’s trade policies continue to take shape.
