President Donald Trump said he plans to impose tariffs of up to 25% on Mexico and Canada by Feb. 1, reiterating his assertion that the United States’ two immediate neighbors are letting Undocumented migrants and drugs flood into the country.
“We’re looking at a 25% reduction for Mexico and Canada because they’re allowing a lot of people” to enter the United States, Trump said in response to questions from reporters in the Oval Office Monday evening. “I think we will do it on February 1.”
Trump’s plans to impose tariffs on two countries vital to U.S. energy and auto imports threaten to spark a trade war between signatories to the United States-Mexico-Canada Agreement, the successor to NAFTA negotiated at Trump’s insistence during his first term. The agreement governs the $1.8 trillion trade flow of goods and services, based on 2022 data.
Canada and Mexico said they would retaliate against U.S. products if Trump imposed tariffs on them. The USMCA is due to be revised in 2026.
“Canada is a very bad consumer,” Trump said, complaining about the flow of fentanyl and migrants across the northern U.S. border.
The dollar surged against most major currencies following Trump’s remarks. Bloomberg’s dollar gauge rose 0.7%, its highest level since Dec. 18, as investors sought the safety of the world’s reserve currency. The Canadian dollar and Mexican peso each fell 1.4% against the greenback following this news.
Chinese markets saw some relief as Trump did not announce immediate measures against the world’s second-largest economy.
An index of Chinese stocks traded in Hong Kong rose 1%, while indicators on the mainland fluctuated. The offshore yuan slipped 0.2%, but retained most of its rally from Monday.
US Reaction: Trump Day One: Tariffs Delayed, Not Denied
Tariffs of the magnitude Trump is proposing to America’s neighbors would be a “disaster” for the U.S. auto industry and Detroit automakers, which each import significant numbers of vehicles from Canada and Mexico, analysts at Bernstein in a November research note. Stellantis NV imports about 40% of the vehicles it sells in the United States, while General Motors Co. imports about 30% and Ford Motor Co. 25%, they said at the time.
The additional levies would affect about $97 billion in auto parts and 4 million finished vehicles entering the United States from those countries, and could increase the average price of new cars by about $3,000, according to Wolfe Research.
Trump also indicated he was still considering a universal tariff on all foreign imports to the United States, but said he was “not ready for that yet.”
“You would impose a universal tariff on anyone who does business in the United States, because they come here and steal our wealth,” he said, adding that implementation could be “rapid.”
In a November 25 article on Truth Social, Trump warned that he would impose 25 percent tariffs on all Mexican and Canadian imports as “one of my many first executive orders” and said he would “remain in effect until drugs, especially Fentanyl, and all illegal aliens stop this invasion of our country! »
These tactics sparked a rush in Mexico and Ottawa to demonstrate to the new president that both governments were responding to his concerns.
Days later, Prime Minister Justin Trudeau, who has since said he was resigning, flew to Florida to make Trump understand that the number of migrants crossing the country’s border into the United States is low and that Canada also works closely with the United States to stop drug trafficking.
Canada also drew up an initial list of C$150 billion ($105 billion) worth of U.S.-made items that would be hit with tariffs if the first salvo came from Trump, who has taunted Canadians by inviting to become the 51st American state.
“None of this should be surprising. The one thing we learned is that President Trump can be unpredictable sometimes,” Dominic LeBlanc, Canada’s finance minister, told reporters shortly after Trump’s comments.
The Canadian government will continue to discuss border security and other issues with the Trump administration, LeBlanc said. “In our conversation with U.S. officials, we talked about our shared commitment to fighting fentanyl, to ensuring that immigration is orderly and legal.”
In December, the Trudeau government outlined a plan to spend about $1 billion on additional measures, such as more helicopters and drones near the border.
Mexico has sought to avoid the imposition of tariffs, taking steps to appease Trump, including seeking to reduce imports from China and making a record seizure of fentanyl.
Mexican President Claudia Sheinbaum’s government has said the tariffs could affect the countries’ $800 billion in annual trade and could potentially spur inflation in the United States.
–With assistance from Brendan Murray, Carolina Millan, Laura Dhillon Kane, Maya Averbuch, Malcolm Scott and Tan Hwee Ann.
(Updated markets details in sixth paragraph, China details in seventh and eighth paragraphs.)
