US tariffs on imports from Canada and Mexico take effect

US Tariffs on Canada, Mexico, and China Take Effect, Sparking Economic Concerns

The United States has implemented steep tariffs on imports from Canada and Mexico after a deadline to reach a deal passed without an agreement. Initially announced in February but later paused, these blanket tariffs were introduced by former President Donald Trump, citing concerns over illegal immigration and drug trafficking. Moving forward with the levies, Trump pointed to a lack of progress in curbing the influx of drugs like fentanyl into the US.

Following Trump's statement on Monday that there was "no room left" for Canada and Mexico to avoid the duties, US stock markets fell sharply. The tariffs now impact over $918 billion worth of imports from both countries. Additionally, Trump signed an order increasing the previously imposed 10 percent tariff on Chinese goods to 20 percent, further escalating trade tensions.

In response, Beijing vowed to take countermeasures to protect its economic interests. Economists warn that tariffs could increase consumer prices while negatively impacting economic growth and employment. Asian markets reacted to the news on Tuesday, with Japan’s Nikkei index falling over two percent and Hong Kong’s Hang Seng dropping 1.5 percent.

According to the Tax Foundation, before accounting for foreign retaliation, tariffs on Canada, Mexico, and China could each reduce US economic output by 0.1 percent. Moreover, broad duties on Canadian and Mexican imports threaten supply chains in key industries such as automobiles and construction materials, potentially driving up costs for households. This move could complicate Trump’s campaign promises of reducing prices for American consumers.

Speaking to reporters, Trump suggested that Canada and Mexico should establish manufacturing plants in the US to avoid tariffs. Former US officials view his tariffs on drugs like fentanyl as an approach to address socio-economic issues while creating legal grounds for swift action. Analysts believe Washington is also using tariffs as leverage to rebalance trade relationships, though the invocation of emergency economic powers to impose these tariffs is an unprecedented move that could face legal challenges.

Retaliatory Measures and Economic Impact

Canadian Prime Minister Justin Trudeau responded by announcing retaliatory tariffs of 25 percent on US imports, stating, "Canada will not let this unjustified decision go unanswered." Meanwhile, Mexican President Claudia Sheinbaum confirmed that Mexico has contingency plans in place.

Economists warn that if Trump's tariff plans continue, the US could face its highest effective tariff rate since 1936 by early 2026. Consumers and manufacturers alike may bear the financial burden, leading to reduced demand and potential layoffs as businesses attempt to manage rising costs.

Robert Dietz, chief economist at the National Association of Home Builders, warned that combined tariffs on Canadian lumber could exceed 50 percent, potentially increasing the cost of newly built homes by $7,500 to $10,000. Even as the US seeks to expand domestic forestry, short-term price hikes are expected.

Industry Backlash

The business community has expressed strong opposition to the tariffs. The US-China Business Council, representing approximately 270 American firms operating in China, warned that sweeping tariffs would harm US companies, consumers, and farmers while undermining global competitiveness. "Any use of tariffs should be strategic and targeted, focusing on specific US national security goals and unfair Chinese economic practices," said council president Sean Stein.

The National Retail Federation also voiced concerns, cautioning that as long as tariffs on Canada and Mexico remain in place, "Americans will be forced to pay higher prices on household goods."

While the US has targeted China over fentanyl-related chemicals, many of these substances have legitimate industrial applications, complicating enforcement efforts. Trudeau has also noted that less than one percent of fentanyl and undocumented migrants entering the US come through the Canadian border.

With growing economic risks and legal uncertainties surrounding the tariffs, global markets and key industries are bracing for further disruptions.