President Donald Trump signed an executive order issuing tariffs on goods coming into the U.S. from Canada, Mexico and China, raising the risk of a trade war with America’s closest trading partners and threatening to drive up prices on everything from cars to avocados.
The only products exempt from the tariffs are Canadian energy products, which would have a lower tariff rate of 10% to “minimize any disruptive effects we might have on gasoline and home heating oil prices,” said the senior administration official.
The U.S. will begin collecting the tariffs on Canadian goods on Tuesday. It is unclear when the tariffs on Mexico and China would go into effect.
The White House said in a statement that the tariffs were being implemented to pressure the three countries into stopping the flow of fentanyl and immigrants into the U.S. and would remain in place until “the crisis is alleviated.”
“We need to protect Americans, and it is my duty as President to ensure the safety of all,” Trump said in a post on Truth Social announcing he had signed the tariffs. “I made a promise on my Campaign to stop the flood of illegal aliens and drugs from pouring across our Borders, and Americans overwhelmingly voted in favor of it.”
More than 107,000 people died from drug overdose in 2023, with nearly 70% of those deaths from opioids, including fentanyl. Nearly all of the 21,900 pounds of fentanyl seized in 2024 was at the southern border, with just 43 pounds of fentanyl seized at the northern border, according to data from Customs and Border Protection.
It was unclear what specific actions the U.S. was looking for the three countries to take in order to lift the tariffs.
“There’s going to be a wide range of metrics,” said a senior administration official during a Saturday call with reporters about the tariffs.
“In Donald Trump’s golden age, we will have only legal immigration and we will have zero Americans dying from Chinese, slash Mexican, slash Canadian fentanyl,” the official said.
Economists across the political spectrum expect tariffs to increase what consumers pay for a range of goods, including vehicles, electronics, produce and lumber. Tariffs are paid by companies importing goods into the U.S., similar to a tax. A range of businesses from homebuilders to alcohol producers warned of the negative economic impact the tariffs would have for businesses and consumers following the tariff announcement.
“Imposing additional tariffs on these imports will lead to higher material costs, which will ultimately be passed on to home buyers in the form of increased housing prices,” said Carl Harris, chair of the National Association of Home Builders.
“Further supply chain disruptions from increased tariffs coupled with increased demand for materials could also hinder rebuilding efforts in areas affected by natural disasters, which you have pledged to help rebuild as quickly as possible,” Harris added.
While some businesses will look to source goods elsewhere, others with no alternatives will be forced to pay the fees. That means U.S. grocery stores will shoulder higher costs for fruits and vegetables grown in Mexico; homebuilders will pay more for Canadian lumber; and automakers will have to pay a tariff each time a component crosses the northern or southern border, which happens repeatedly during the production of a single vehicle.
Companies will have to decide whether to pass these higher costs to consumers or absorb them, which would dent profits or require cuts to protect their margins. The implications could be wide-reaching across the U.S. economy, in part because American consumers and businesses imported more goods from Mexico than any other country.
“Tariffs on all imported goods from Mexico and Canada — especially on ingredients and inputs that aren’t available in the U.S. — could lead to higher consumer prices and retaliation against U.S. exporters,” said the Consumer Brands Association, which represents makers of packaged food and health products.
The Aluminum Association, which represents aluminum production and jobs in the U.S., said in a statement that the U.S. sources two-thirds of the primary aluminum it uses every year from Canada and about 90% of scrap metal from either Canada or Mexico. It added that U.S.-based smelters, even at full capacity, “cannot produce nearly enough metal to meet demand.”
“It would take billions of investment over decades to make the United States fully self-sufficient for its metal needs,” the association said, asking Trump to exempt the aluminum metal supply needed for American manufacturers.
The United Auto Workers union — which could be doubly affected since a company will be expected to pay a 25% Canadian tariff to ship a component to Canada and then another 25% when it comes back into the U.S. to be assembled into a vehicle — said it does not “support using factory workers as pawns in a fight over immigration or drug policy.”
“We are willing to support the Trump Administration’s use of tariffs to stop plant closures and curb the power of corporations that pit US workers against workers in other countries,” UAW President Shawn Fain said. “But so far, Trump’s anti-worker policy at home, including dissolving collective bargaining agreements and gutting the National Labor Relations Board, leaves American workers facing worsening wages and working conditions even while the administration takes aggressive tariff action.”
Trump made tariffs central to his campaign pitch for improving an economy that many voters cited as their reason for returning him to the White House. He has argued the levies would protect American industries from unfair competition by making foreign goods pricier and encouraging companies to manufacture in the U.S. He has also proposed using revenue from tariffs to pay for other policy priorities and deploying them as a negotiating tool.
“This is a beautiful, beautiful example of promises made, promises kept by President Trump,” said the senior administration official.
But economists have found the tariffs Trump imposed on China during his first term did little to accomplish those goals. Instead, they drove up prices for many imports, led to a net loss of manufacturing jobs and reduced corporate investments. Nearly all the revenue collected from Trump’s previous tariffs on China went to payments he sent to American farmers to offset their losses from tariffs China imposed in response. The levies also didn’t generate significant concessions from Beijing, which has failed to meet many of its commitments under a trade deal negotiated during Trump’s first term.
The United Steelworkers International, which has pushed for trade reforms to protect U.S. steel workers, warned that the sweeping tariffs could have a negative impact on workers.
“These tariffs don’t just hurt Canada. They threaten the stability of industries on both sides of the border,” said David McCall, president of the United Steelworkers International.
The president’s latest tariffs on Canada and Mexico threaten to upend one of his signature trade pacts, the United States-Mexico-Canada Agreement. Trump had touted the deal as a victory, as it largely allowed products to move between the three countries tariff-free, much as they’d done for decades under the NAFTA agreement that the USMCA replaced. The current trade deal isn’t up for review until July 2026, but the new tariffs could throw it into jeopardy much sooner.
“This is not him changing some other administration’s work. This is him changing his administration’s work,” said Francisco Sanches, an international trade lawyer with Holland and Knight and a former U.S. undersecretary of commerce for trade during the Obama administration.
The White House said Trump would be issuing the tariffs under the the International Emergency Economic Powers Act. Despite the USMCA, Trump said he has the legal authority to regulate imports during a national emergency, which he declared at the southern border on the first day of his second term.
While most of Trump’s tariff threats during his campaign focused on China, he has ratcheted up his focus on Canada and Mexico since he was elected. Both countries vowed to retaliate, which would make American products less competitive within their borders and hurt U.S. businesses that sell there. Cars, oil and gas, electronics, industrial equipment and agricultural products are among the top U.S. exports to Canada and Mexico.
“What we’ve seen in these types of circumstances when the United States has put tariffs on another country is an attempt by our trading partners to target really sensitive stakeholders and locations,” said Greta Peisch, a trade lawyer at Wiley Rein who was general counsel for the U.S. Trade Representative during the Biden administration. “They’re very savvy and understand how our process works and what makes an impact potentially.”
The senior administration officials said there is a “retaliation clause” in the executive order issuing the tariffs where if any country chooses to retaliate the U.S. will take further action.
A trade war among the three countries would reduce the economic growth for all of them but could especially impact Mexico, according to an analysis by the Peterson Institute.
“For Mexico, a 25% tariff would be catastrophic. Moreover, the economic decline caused by the tariff could increase the incentives for Mexican immigrants to cross the border illegally into the US—directly contradicting another Trump administration priority,” the report said.
The U.S. auto industry is among the most vulnerable to tariff impacts. For decades, its supply chains have been heavily intertwined with America’s neighbors to the north and south. As vehicles and components cross borders multiple times during the production process, repeated 25% levies could quickly drive up vehicle costs.
The U.S. also depends on food products from Mexico, one of the top suppliers of tomatoes, avocados, berries and peppers. Rising food prices have been a top concern for consumers and voters, with grocery costs up around 25% over the past four years — an issue Trump hammered on the campaign trail. The tariffs could also drive up the prices of beer and alcohol imported from Mexico.
“We are deeply concerned that U.S. tariffs on imported spirits from Canada and Mexico will significantly harm all three countries and lead to a cycle of retaliatory tariffs that negatively impacts our shared industry,” the Distilled Spirts Council said in a statement.
After his earlier threats, Mexico threatened retaliatory tariffs on American goods sold there, which total around $360 billion. That could hurt U.S. businesses selling to Mexican consumers.
Along with immigration, Trump and lawmakers have raised concerns that China could be using Mexico as a back door into the U.S. to avoid paying tariffs. Mexico has seen a surge in manufacturers relocating there from China as a way to avoid the tariffs Trump put on China during his first term. Investment deals announced by Chinese companies in Mexico have surged over the last few years, according to data compiled by the research firm Rhodium Group.
The tariffs on Canada are expected to drive up prices of Canadian lumber, known for being lighter and easier to work with, said Dustin Jalbert, a senior economist for wood products at Fastmarkets.
Canadian lumber mills have already been struggling from previous duties imposed by the U.S. in recent years and the destruction of millions of acres of forest from a pine beetle infestation. More tariffs could hobble the industry further, he said.
“Consumers are going to pay for that in some capacity because in the end, you have less supply available in the market, and prices are going to be somewhat higher on the margin,” said Jalbert.
That could keep pressure on home prices that are already far out of reach for millions of Americans, the National Association of Home Builders has warned.
The tariffs could also drive up gas prices, as crude is among Canada’s top exports to the U.S., hampering Trump’s ambitious vow to halve energy costs in his first 12 months.
This article was originally published on NBCNews.com
