CNN
—
President Donald Trump announced extraordinary new tariffs on Mexico, Canada and China — signing the long-promised economic policy at his Mar-a-Lago club on Saturday. The Trump administration said tariffs are aimed at curbing the flow of drugs and undocumented immigrants into America, but they potentially risk substantial price increases for American consumers across a wide array of common goods from avocados to sneakers to cars.
The new policy represents a reversal of virtually duty-free trade among the three North American nations that’s existed for several years — and an expansion of a frosty trade war between China and the United States that has escalated over the course of the past two administrations.
As Trump has repeatedly promised over the past several months, the tariffs will amount to a significant 25% duty on all imports from Mexico and most goods from Canada and a 10% tariff on Chinese goods imported into the United States. The tariffs will have no exemptions, and the executive action Trump signed Saturday will close the so-called de minimis loophole that had allowed shipments of $800 or less to come into the United States tax-free – a key provision used by many American small businesses but also Chinese companies like Shein and Temu. Trump administration officials said the loophole prevented customers officials from properly inspecting those packages.
Although Trump administration officials said Saturday the tariffs were designed to stop the flow of fentanyl and undocumented immigrants, they gave no specific benchmark for the new import taxes to be lifted — other than the cessation of the drugs and undocumented immigrants coming into the country.
The tariffs are expected to invite retaliation, perhaps igniting a trade war that could significantly damage the economies of the targeted countries and the United States. In anticipation of that, Trump’s executive action includes a clause that allows the president to expand the tariffs if a country imposes new tariffs on the United States.
Notably, the tariffs included an important carve-out — the tariff on Canadian energy products will be 10%. Many Americans rely on Canadian energy products, including oil, electricity, natural gas, for fuel and home heating. The cost of those items could rise when the tariffs are put in place.
To put the tariffs in place, Trump in his executive action declared a national economic emergency, invoking the International Emergency Economic Powers Act, known as “IEEPA,” which unilaterally authorizes a president to manage imports during a national emergency. The tariffs are set to go into effect on Tuesday morning at 12:01 am ET.
“Today, I have implemented a 25% Tariff on Imports from Mexico and Canada (10% on Canadian Energy), and a 10% additional Tariff on China,” Trump said in a message posted to Truth Social on Saturday. “This was done through the International Emergency Economic Powers Act (IEEPA) because of the major threat of illegal aliens and deadly drugs killing our Citizens, including fentanyl. We need to protect Americans, and it is my duty as President to ensure the safety of all.”
The tariffs could lead to potentially much higher costs, disrupted supply chains and the loss of jobs. In a call with reporters Saturday, a Trump administration official said any retaliation from Mexico, China or Canada would likely result in even higher tariffs for that country. Even Trump acknowledged the potential for adverse consequences on American consumers.
“There could be some temporary, short-term disruption, and people will understand that,” Trump said Friday when pressed by reporters on the cost of tariffs being passed on to importers, and, by extension, consumers. “But the tariffs are going to make us very rich and very strong — and we’re going to treat other countries very fairly.”
Canadian Prime Minister Justin Trudeau, in anticipation of Trump’s actions, has said previously that Canada would retaliate forcefully and swiftly if the United States imposed tariffs. The country’s trade representatives met with Trump administration officials as recently as Friday in an attempt to stave off the tariffs.
Jonathan Wilkinson, Canada’s natural resources minister, said in a post on X that Canada did “nothing to provoke tariffs” from the United States but is “prepared and ready to fight” for its residents. Tim Houston, premier of Nova Scotia, announced his small Canadian province will take all US alcohol off the shelves Tuesday when the tariffs go into effect. Ontario, a much larger province, has threatened to do that as well.
Mexico’s President Claudia Sheinbaum struck a defiant tone on Saturday.
“When we negotiate with other nations, when we talk with other nations, [it is] always with our heads held high, never bowing our heads,” Sheinbaum said speaking in Chicoloapan de Juárez, east of the country’s capital.
Tariffs are one of the few policies Trump has consistently supported for decades, a rare through-line from his days as a New York developer to his time in public office (another is immigration). As a candidate, he swore he’d use tariffs — “the most beautiful word in the dictionary” — to wield US leverage abroad.
But tariffs are unpopular among mainstream economists, who largely agree that tariffs cause inflation. That’s because importers — not the countries exporting the goods — pay the tax, and they typically pass that cost on to consumers in the form of higher prices. New research from the Peterson Institute for International Economics suggests Trump’s aggressive tariff campaign will force American consumers to pay more for practically everything — from foreign-made sneakers and toys to food.
Despite running as a pro-business CEO president, corporations and business groups were apoplectic about the tariffs Saturday.
The US Chamber of Commerce slammed President Donald Trump’s tariffs on Saturday, warning they will raise consumer prices. In a statement, the powerful business group acknowledged that Trump is right to focus on securing the border and to fight the illicit flow of fentanyl.
“But the imposition of tariffs under IEEPA is unprecedented, won’t solve these problems, and will only raise prices for American families and upend supply chains,” said John Murphy, senior vice president and head of international at the Chamber. “The Chamber will consult with our members, including main street businesses across the country impacted by this move, to determine next steps to prevent economic harm to Americans.
The Distilled Spirits Council of the US, the Chamber of the Tequila Industry and Spirits Canada said in a joint statement shared with CNN on Saturday that they are “deeply concerned that U.S. tariffs on imported spirits from Canada and Mexico will significantly harm all three countries.” Last year, the US imported $46 billion of agricultural products from Mexico, according to US Department of Agriculture data. That includes $8.3 billion worth of fresh vegetables, $5.9 billion of beer and $5 billion of distilled spirits.
The energy industry was unsatisfied with the reduced tariffs on Canadian oil, gas and electricity. The American Petroleum Institute, which represents Big Oil and natural gas companies, said in a statement that it wanted to be fully left out of the tariffs. It noted fuel prices would rise on the $14.4 billion of oil and natural gas imported each year from Canada.
“We will continue to work with the Trump administration on full exclusions that protect energy affordability for consumers, expand the nation’s energy advantage and support American jobs,” API CEO Mike Sommers said in a statement.
NEMA, which represents the electricity industry, urged the Trump administration to take a more cautious approach to tariffs, noting the electricity and the electronics industries make up a large chunk of America’s imported and exported goods and could be retaliated against.
“We are hopeful a resolution can be quickly reached with our North American neighbors so that crude oil, refined products and petrochemicals are removed from the tariff schedule before consumers feel the impact,” said American Fuel & Petrochemical Manufacturers CEO Chet Thompson.
Western Growers, which represents farmers, said the tariffs would hurt America’s food producers.
“While we appreciate the border security issues apparently motivating the Trump Administration, rival growers of specialty crops outside of the U.S. will move quickly to seize the new business opportunities created by these tariffs to sell into the Canadian, Mexican and Chinese marketplaces,” Western Growers CEO Dave Puglia said in a statement. “Their success in doing so could permanently displace American growers from these key markets.”
Consumer advocacy groups also warned that Trump’s plans would raise costs for Americans.
“Tariffs are a tax increase on American households and manufacturers,” said National Taxpayers Union President Pete Sepp in a statement. “Putting a tax on goods Americans depend upon jeopardizes the Make America Great Again agenda, including the Trump Administration’s plan to unleash American energy and its efforts to lower the cost of housing, food, and fuel. Instead, American families will suffer under the crushing weight of tarifflation.”
Mexico, China and Canada are the United States’ three largest trade partners.
And in 2023, Mexico overtook China as the top nation exporting goods to the US, marking the first time in two decades China was not the top-ranking exporter. Tariffs the first Trump administration put in place, which the Biden administration largely maintained, have negatively impacted the amount of goods the US imports from China. Mexican and Canadian goods have been imported in the US virtually duty-free as a result of the United States-Mexico-Canada Agreement, that Trump negotiated with America’s bordering nations during his first administration.
Mexico maintained that top position last year as well, exporting $467 billion worth of goods to the US, followed by China and Canada, which exported $401 billion and $377 billion worth of goods, respectively.
That’s according to Commerce Department figures from last year through November, the most recent month of available data. Collectively, the three countries accounted for 42% of the nearly $3 trillion worth of goods the US imported worldwide last year.
Canada was the top country the US exported goods to last year, valued at $322 billion, followed by Mexico and China, which received $309 billion and $131 billion worth of goods from the US, respectively. US exports to the three countries accounted for over 40% of the $1.9 trillion worth of goods the US exported globally last year.
That means Americans could pay a lot more for a wide range of goods.
For instance, the US imported $87 billion worth of motor vehicles and $64 billion worth of vehicle parts from Mexico last year, not accounting for December, the top two goods imported from there that year, according to Commerce Department data. Both are likely to get more expensive almost immediately after any new tariffs are signed that impact Mexican car exports to the US.
Automakers have operated as if Canada, Mexico and the United States were all one unified market for decades, moving vehicles and parts across borders as they assemble vehicles. Even cars assembled at US auto plants all have parts that come from both Mexico and Canada, and vehicles assembled in those two countries have parts that come from US factories.
Canada now accounts for nearly a quarter of steel imported by American businesses by weight, while Mexico accounts for about 12%, according to government data provided by the American Iron and Steel Institute, an industry trade group.
Gas, fresh produce, consumer electronics — some of the top goods the US imports from Mexico, China and Canada — could also be set to get more expensive with blanket tariffs.