By Vipal Monga in Toronto, Gavin Bade and Brian Schwartz in Washington, and Santiago Pérez in Mexico City
The U.S. will impose 25% tariffs on nearly all imports from Canada and Mexico, a 10% tariff on energy products from Canada, and an additional 10% tariff on China, effective Tuesday, sparking a continental trade war with the first major levies of President Trump's second term.
The White House announced the wave of duties Saturday, and aides said the tariffs would be imposed under an emergency economic authority that hasn't previously been used to impose tariffs. Echoing Trump, White House aides cited a flood of fentanyl and its precursors originating in China and being manufactured in Mexico and Canada before being smuggled into the U.S.
There will be no exemptions to the tariffs, a senior administration official said, and the duties will be in place until the White House is satisfied that the trading partners have scrubbed out the illicit fentanyl tracking into the U.S. The tariffs also include a retaliation clause that will increase penalties if the trading partners strike back at the U.S. with tariffs, the official said. And the U.S. will suspend what is known as the "de minimis" loophole for Canada, which allows shipments valued under $800 to enter the country duty-free, because of concerns that those packages were not being properly inspected under the exemption.
The imposition of tariffs sparked an immediate response from the Canadian government, which was notified earlier in the day about the tariffs after weeks of frantic negotiations aimed at avoiding a continental trade war. Mark Carney, the former governor of the Bank of England who is currently running to replace outgoing Canadian Prime Minister Justin Trudeau, on Saturday called on Canada to retaliate with dollar-for-dollar retaliatory tariffs.
"Canada will not bow down to a bully," he said.
Mexico's government wasn't formally notified of the U.S. measures, even after the White House released its fact sheet outlining its unilateral tariffs, said one Mexican official. Mexico's government didn't immediately comment on Trump's measures.
The U.S. imported about $418.6 billion in goods from Canada in 2023, according to Census Bureau data. Of that, imports of crude oil, natural gas, electricity and other energy-related products accounted for at least $106 billion that year. The administration didn't immediately specify the tariff codes covered by the 10% energy duty.
Trump for weeks has threatened to impose tariffs on Canada, Mexico and China over the illicit fentanyl trade, and his team had been negotiating with their North American counterparts to potentially avoid the levies. A senior administration official said Saturday that negotiations with Canada and Mexico would continue, but appeared to set a high bar for any tariff reductions.
The "best metric" for progress, the official said, would be that Americans "stop dying" from illegal fentanyl and that migration and broader criminal activity at U.S. borders is "dramatically reduced."
Trudeau was made aware Saturday that the Trump administration was moving ahead with the tariffs, said Ontario Premier Doug Ford. U.S. Commerce secretary nominee Howard Lutnick made the call to the Canadian government, Ford said, citing Trump's concerns with fentanyl coming across the border.
Speaking in the Oval Office on Friday, the president suggested the Mexico-Canada-China tariffs would just be the beginning, pledging that the U.S. would impose tariffs on computer chips, pharmaceuticals, steel, aluminum, copper, oil and gas imports as soon as mid-February.
"That'll happen fairly soon," Trump told reporters in the Oval Office, adding that he also wants to hike tariffs on the European Union, which has "treated us so horribly," though he didn't specify when or how high the duties would be. A representative for the European Union didn't respond to a request for comment.
The announcement for those sector-based and EU tariffs appeared separate from the duties on Mexico, Canada and China.
The duties previewed by Trump would come on top of existing tariffs on those products, he said, waving away any concern about the levies increasing inflation or snarling global supply chains.
"I think there could be some temporary, short term disruption and people will understand that," Trump said. "The tariffs are going to make us very rich and very strong."
The actions mark the first time the International Economic Emergency Powers Act has been used to impose tariffs, said Barry Appleton, an international trade lawyer and co-director of the New York Law School's Center for International Law. President Richard Nixon used a precursor to the law to impose 10% tariffs on all imports in 1971.
The act gives Trump broad powers and makes it difficult for Congress to overturn the decision, Appleton said, noting that legal challenges are likely, particularly on whether the measures are genuinely linked to fentanyl trafficking.
"However, courts have historically deferred to presidential authority," he said.
Trump's team were in negotiations over how to potentially dial back tariffs on those countries from the across-the-board version the president has pledged, but officials had warned that Trump may still decide to go through with a full-throated approach.
Trump's team was considering a grace period between the announcement of the tariffs on Saturday and when they would actually be imposed. But White House press secretary Karoline Leavitt seemed to play down that possibility on Friday, telling reporters Trump "will implement his tariffs tomorrow."
Trump told reporters in the Oval Office that there was nothing Canada, Mexico and China could do to avoid the tariffs before Saturday.
Trump's decision to avoid carve-outs showed he is willing to take on economic risk in pushing other nations to adhere to his policy demands. For weeks, large U.S. industries such as the oil and automotive sectors have lobbied him for exemptions from the tariffs, warning of higher prices and continental-wide supply-chain issues, while Canada and Mexico have prepared a list of retaliatory measures to hit U.S. products with tariffs in kind.
Trump advisers have considered exemptions for oil imports and automobiles that comply with the U.S.-Mexico-Canada Agreement, the updated Nafta deal that Trump negotiated and signed in his first term.
This round of Trump tariffs could cover more trade in dollar value than his first-term duties on China. Trump's four tranches of tariffs on Chinese goods in 2018-19 covered imports valued at roughly $360 billion at the time. New tariffs on Canada and Mexico plus additional tariffs on China would -- if all items are subject to the action -- cover imports valued at more than $1.3 trillion in 2023.
Canada and Mexico combined supplied about 28% of U.S. imports in the first 11 months of 2024, according to Census Bureau data. China accounted for an additional 13.5%.
U.S. Customs and Border Protection reported that last fiscal year 21,148 pounds of fentanyl was seized at the southwest border, the most from U.S. citizens coming through legal ports of entry. On the northern border, CBP reported seizing 43 pounds of the drug.
Throughout the process, Mexican and Canadian officials expressed frustration that they don't know what actions would satisfy Trump's demands, despite weeks of meetings between senior officials.
Mexican President Claudia Sheinbaum said her government is ready for Trump's tariffs and would respond in kind.
"We have Plan A, Plan B, Plan C for whatever the U.S. government decides, " Sheinbaum said. "It's important to remember the implications that imposing tariffs could have for the U.S. economy."
Mexican Economy Minister Marcelo Ebrard said a 25% duty on Mexican goods would have a multibillion-dollar impact on U.S. consumers, affecting millions of households, adding that tariffs would also raise prices of fresh fruit and vegetables, meat and beer.
This week, the United Steelworkers, a powerful union with many members who voted for Trump across the industrial Midwest, called on Trump to back away from across-the-board tariffs. Behind closed doors, the steelworkers union has stressed the importance of Canadian oil to many of its members, pointing out that about 30,000 steelworkers are employed by oil refineries that use Canadian crude -- oil that could be replaced by imports from other countries, including Venezuela, if Canadian oil becomes too expensive.
The union on Saturday criticized Trump's tariffs, saying that while it supports rebalancing trade with Canada and Mexico, it would prefer a "targeted" tariff approach on certain products, rather than "sweeping actions that undermine crucial relationships."
While the U.S., Canada and Mexico have a standing free-trade agreement, it isn't clear that the expected tariff action would immediately violate that pact. The U.S.-Mexico-Canada Agreement, like most trade pacts, includes a provision that allows for the imposition of tariffs on national-security grounds.
But some veterans of the USMCA talks say Trump's tariff move strikes them as an abuse of that loophole. The national security emergency exception was meant for "break glass" scenarios, one person involved in the negotiations said, and if it is invoked at "the drop of a hat," the overall pact is undermined.
--Natalie Andrews and Anthony DeBarros in Washington contributed to this article.
Write to Gavin Bade at gavin.bade@wsj.com, Natalie Andrews at natalie.andrews@wsj.com, Vipal Monga at vipal.monga@wsj.com and Santiago Pérez at santiago.perez@wsj.com
(END) Dow Jones Newswires
February 01, 2025 18:17 ET (23:17 GMT)
Copyright (c) 2025 Dow Jones & Company, Inc.
Comments