President Trump said Friday that he will impose punitive tariffs of 25% on goods imported from Canada and Mexico and 10% on goods imported from China starting tomorrow, February 1.
White House Press Secretary Karoline Leavitt told reporters at a press briefing that the president intends to follow through on his threats to impose tariffs on the nation’s largest trade partners as part of an effort to pressure those countries to limit the flow of drugs and migrants into the U.S. Leavitt claimed that all three countries have “enabled illegal drugs to pour into America.”
“The amount of fentanyl that has been seized at the southern border in the last few years alone has the potential to kill tens of millions of Americans,” Leavitt said. “And so the president is intent on doing this.”
Leavitt said she had no information about possible exemptions from the tariffs.
In remarks delivered later in the day in the Oval Office, Trump said there was nothing China, Mexico or Canada could do at this point to stop the tariffs. He said to expect future tariffs on steel, aluminum and copper, with levies on oil, gas and pharmaceuticals also in the pipeline. He also said tariffs on European nations were in the works.
Destructive potential: The tariffs on Canada and Mexico threaten to upend roughly $1.9 trillion in trade in North America, which has operated as a free trade zone with tightly integrated production systems for three decades.
One particularly vulnerable sector spanning North America is auto production. Scott Lincicome of the conservative Cato Institute told the Associated Press that the tariffs could blow up deeply enmeshed supply lines. “You have engines and car seats and other things that cross the border multiple times before going into a finished vehicle,’’ he said. “You have American parts going to Mexico to be put into vehicles that are then shipped back to the United States. You throw 25% tariffs into all that, and it’s just a grenade.’’
A Canadian auto executive told The New York Times that the tariffs have the potential to bring production to a halt within a week. “Nobody can absorb this kind of cost, not the automakers, not the suppliers, not consumers,” said Linda Hasenfratz of Linamar, which manufactures auto parts in all three countries. “Demand will collapse, and vehicle production will grind to a halt, putting millions of workers out of work, the vast majority of which are in the U.S.”
Other key imports from Canada are oil and timber, while Mexico is a top supplier of manufactured goods and agricultural products including tomatoes, avocados, berries and peppers.
All three countries threatened with tariffs have declared that they plan to retaliate against U.S exports, raising the possibility of a deeply disruptive trade war. “If the president does choose to implement any tariffs against Canada, we’re ready with a response — a purposeful, forceful but reasonable, immediate response,” Prime Minister Justin Trudeau of Canada said Friday. “It’s not what we want. But if he moves forward, we will also act.”
Higher prices could be ahead: Many economists think the tariffs would be inflationary, as the higher fees paid by U.S. importers are passed onto U.S. consumers in the form of higher prices. Asked about the risk of inflation, Leavitt dismissed the widespread concerns. “President Trump is going to do everything he possibly can to cut the inflation crisis that the previous administration imposed on the American people, and he will continue to effectively utilize tariffs,” she said.
Whatever effect the tariffs may have on consumer prices, it seems likely that they will act as a drag on the economy, at least in the short and medium term. According to a new Urban-Brookings Tax Policy Center analysis, American businesses will reduce their imports from Canada and Mexico by 40% if a 25% tariff is imposed. The tariffs would raise $110 billion in the first full year, with that total falling each year as companies and consumers change their behavior. American households would be worse off, since tariffs are paid by initially importers and ultimately by consumers. The Tax Policy Center estimated that after-tax household incomes would be $930, or nearly 1%, lower in 2026 on average due to the tariffs.
An analysis by Ernie Tedeschi of the Yale Budget Lab found an even larger hit to consumer finances. Trump’s tariffs on Canada, Mexico and China would produce an 0.8% increase in the price level, Tedeschi told the Times, costing households about $1,300 a year on average.
Trump defended the tariffs on Friday afternoon, saying they will lead to success, not inflation. “There may be some temporary, short-term disruption,” he said, “but people will understand that.”