Trump Administration Imposes Tariffs on Goods from Canada, Mexico, and China

What Happened?

President Trump signed an order on Saturday imposing sweeping tariffs on goods from Mexico, Canada, and China. 

The order imposes tariffs of 25% on good from Mexico and Canada while levying a 10% tariff on goods from China. The tariffs make good on a promise Mr. Trump made during the 2024 presidential election campaign. 

Trump Administration officials notified Canada that the new tariffs would take effect Tuesday. Canadian Prime Minister Justin Trudeau revealed plans to impose 25% tariffs on U.S. goods.

The new order signed by Mr. Trump levies tariffs on a range of consumer goods from agricultural products to electronics.

Why it Matters

Mr. Trump has accused China, Mexico, and Canada of flooding the United States with illegal immigrants and deadly fentanyl. He has vowed to continue the tariffs until those issues are addressed. 

Whether the tariffs will elicit any policy changes from the governments of Mexico, Canada, and China remain to be seen.

Meanwhile the new tariffs will increase costs on a significant range of American goods and products. The tariffs will have a ripple effect throughout the U.S. economy.

Suppliers who source components or parts from manufacturing from China, Mexico, or Canada will likely have no choice but to raise the prices of their goods. That will be in order to cover the costs imposed by the new tariffs.

While the new tariffs will increase revenue for the American government, it will be paid for by the American consumer. Mr. Trump has acknowledged that the tariffs might cause price increases for Americans, but he has maintained they are necessary.

In addition to the cost increases faced by American consumers, it’s likely Mexico, Canada, and China will retaliate by imposing tariffs of their own on U.S. exports sold in their countries.  

Leaders in all three countries have hinted they will retaliate, though all the specifics of those actions are not yet known. That could hurt American export businesses by forcing consumers abroad to either pay more for American goods or switch to local products to save money.

According to Reuters ‘a model gauging the economic impact of Trump’s tariff plan from the EY Chief Economist Greg Daco suggests it would reduce U.S. growth by 1.5 percent this year, cause recessions in Canada and Mexico, and trigger stagflation in the U.S.’

How it Affects You

The United States does approximately $1.6 trillion of total business with China, Mexico, and Canada. Leaders from America’s largest corporations have been preparing for the tariffs for some time. 

As HP CEO Enrique Lores said ‘we have been working on this for several quarters.’ Whether those preparations can soften the blow for consumers remains to be seen.

But cost increases for the American consumer on a wide range of goods is now likely. All three countries targeted by the new tariffs have announced they will impose tariffs on U.S. goods in retaliation.