Trump Fires First Shots In Trade War With Tariffs on Mexico, Canada

President Donald Trump Saturday followed through with his threat to impose new tariffs on the United States’ two biggest trading partners, Mexico and Canada.

Deputy White House press secretary Harrison Fields made a post on social media confirming the move. “Tariffs on imports from Canada, Mexico, and China are SIGNED!” he said, accompanied by a siren emoji.

Trump has said the goal is to get those countries to crack down on undocumented immigration and supplies of fentanyl, a synthetic opioid, coming through the border.

Trump had also threatened to impose a 10% tariff on goods from China, the country with the largest trade imbalance with the United States.

Fields’ post did not say when the tariffs would take effect but Trump had threatened to put them in place Saturday. However, Canadian officials told the New York Times they would not go into effect until Tuesday.

Tariffs are charges placed on imported goods as they enter the country, paid by the company or individual bringing the good in. Economists are almost unanimous that tariffs are passed on to the consumer as higher prices.

Whether Trump’s gambit will succeed is unclear, but the potential costs to the U.S. economy could be huge, either in terms of higher prices for American consumers or via retaliatory measures that would mark the beginning of a continental trade war.

In 2023, the last full year for which data is available, Canada was the U.S.’ largest trading partner, buying about $441 billion in goods and services from the U.S., according to the Bureau of Economic Analysis. Mexico was a close second, buying $367 billion of goods and services from America.

The pair were also the largest sellers of imports into the U.S. Mexican imports of goods and services totaled $529 billion, the most of any country, with Canada second, at $482 billion.

The U.S. has run a trade deficit with Mexico, meaning Americans buy more from Mexico than they sell to it, since at least 1999. On the other hand, between 2023 and 2014, the United States saw five trade deficits and five trade surpluses with Canada.

But that is unlikely to deter Trump.

“The fentanyl coming through Canada is massive. The fentanyl coming through Mexico is massive,” he said at a press conference Thursday.

Data from the U.S. Customs Service, however, contradicts part of Trump’s claim. In 2024, the amount of fentanyl seized at the southern border was over 21,000 lbs. Only 43 lbs. were seized at the border with Canada.

Trump has long cited trade deficits as evidence individual countries are “ripping off” the United States, but economists in general are much more relaxed about the issue. Individual countries may have what economists call “comparative advantage” in producing specific goods or services that make it cheaper for another country to import them than try to also produce them itself.

And trade deficits are hardly anything new. The last time the U.S. saw a surplus in international trade was 1975, under President Gerald R. Ford.

Trump’s move would be a challenge to the trade pact he negotiated with the two countries in his first term. While the U.S.-Mexico-Canada Agreement allows for a review in July 2026, imposing the new tariffs before then will likely to be seen as violating it.

But more important for Trump may be the economic costs. The authors of a paper on the tariffs for the Peterson Institute for International Economics estimated last month that raising tariffs on the 3.3% of the U.S. economy made up of imports from Mexico and Canada would result in a general increase in U.S. prices of about 0.3%.

“The political problem for President Trump would not be so much the small increase in the average US price level as price spikes in recognizable goods, like gasoline at the pump in some locations, certain auto brands, avocados, and tomatoes,” the authors wrote.

Another possible side effect of tariffs, the authors wrote, would be closure of factories built on the Mexico side of the U.S.-Mexico border. They were built after the previous North American Free Trade Agreement went into effect to take advantage of lower trade barriers. Without jobs, those workers may migrate north in search of work.

Mexican President Claudia Sheinbaum was skeptical Wednesday Trump would follow through with his threat, telling reporters, “We don’t think it’s going to happen really,” adding “And if it happens, we also have our plan.”

That plan presumably includes retaliatory tariffs on targeted goods the U.S. sells to Mexico.

On Jan. 21, Canadian Prime Minister Justin Trudeau said Canada also had its own cards to play if Trump went ahead. Canada provides about one quarter of the oil used in the U.S. daily.

“If the American economy is going to see the boom that Donald Trump is predicting they are going to need more energy, more steel and aluminum, more critical minerals, more of the things that Canada sells to the United States every single day,” Trudeau said.