President Donald Trump, as reported by the India Today, announced on Monday that 25% tariffs on goods from Mexico and Canada will be implemented starting Tuesday, sparking concerns of a potential trade war in North America and causing turmoil in financial markets.
Trump’s remarks caused a steep decline in US stocks during late afternoon trading, while the Mexican peso and Canadian dollar both experienced a drop.
At the White House, Trump stated, “They’re going to have to face a tariff. What they need to do is build their car plants, and other facilities, in the US, in which case they would avoid tariffs.”
Trump stated that there was “no room left” for a deal that could prevent the tariffs by addressing the flow of fentanyl into the US. He also announced that reciprocal tariffs would be implemented on April 2 for countries that impose duties on US products. Additionally, Trump reiterated his plan to raise tariffs on all Chinese imports from 10% to 20% as a penalty for Beijing’s ongoing shipments of fentanyl to the US.
Trump criticized China, stating that it “has not taken adequate steps to alleviate the illicit drug crisis.” Meanwhile, CEOs and economists warned that Trump’s tariffs on Canada and Mexico, which affect over USD 900 billion worth of annual US imports, could severely impact the highly integrated North American economy.
The Trump administration confirmed that the tariffs are set to take effect at 12:01 AM EST (10:30 PM IST) on Tuesday. Canada and Mexico will face a 25% tariff, with a 10% tariff on Canadian energy. Mexican officials have yet to respond to requests for comment.
Canadian Foreign Minister Melanie Joly told reporters that Ottawa was prepared to respond, saying, “There’s a level of unpredictability and chaos that comes out of the Oval Office, and we will be dealing with it.”
Meanwhile, the stock market reacted sharply, with the Dow Jones Industrial Average dropping 649.67 points, or 1.48%, the S&P 500 losing 104.78 points, or 1.76%, and the Nasdaq Composite falling 497.09 points, or 2.64%.
Automaker stocks plummeted, with General Motors, which has significant truck production in Mexico, dropping 4%, and Ford falling 1.7%.
Gustavo Flores-Macias, a public policy professor at Cornell University, warned that consumers could begin seeing price hikes within days.
Flores-Macias stated, “The automobile sector, in particular, is likely to face significant negative consequences, not only due to the disruption of supply chains that span the three countries in the manufacturing process but also because of the anticipated rise in vehicle prices, which could dampen demand.”
After successfully avoiding the first round of Trump’s tariffs by reaching a last-minute deal to send thousands of troops to its northern border, Mexico has increased anti-drug efforts and suggested potential new measures on imported Chinese goods.
President Claudia Sheinbaum, speaking at a press conference on Monday before Trump’s comments, stated that her government remained calm as it awaited Trump’s decision, but emphasized that Mexico would respond if tariffs were imposed.
“We have a plan B, C, D,” Sheinbaum said, though she did not provide further details. She also noted that coordination with the US on trade and fentanyl trafficking has been “very good.”
According to the Centers for Disease Control and Prevention, 72,776 people died from synthetic opioids in the US in 2023, primarily due to fentanyl.
White House trade adviser Peter Navarro told CNBC on Monday that the inflationary impact of any tariffs would be “second-order small,” adding, “I don’t see the president wavering on any of this, because he knows that in order to build a strong and prosperous America, with rising real wages and more factory jobs, this is the path he has chosen.”
On Saturday, Trump announced another trade action in a series of tariff measures over the past month, launching a national security investigation into imports of lumber and wood products, which could lead to steep tariffs. Canada, already facing a 14.5% U.S. tariff on softwood lumber, would be particularly affected.
The previous week, Trump had ordered the revival of a tariff probe into countries that impose digital services taxes, proposed fees of up to USD 1.5 million every time a Chinese-built ship enters a U.S. port, and initiated a new tariff investigation into copper imports.
These actions are in addition to his plans for higher U.S. “reciprocal tariffs” to match the tariff rates of other countries and counter their trade barriers, a move that could significantly impact the European Union due to the value-added taxes charged by EU countries.
However, Desmond Lachman, a senior fellow at the conservative American Enterprise Institute, warned that Trump’s “tariffs on steroids” agenda could keep inflation elevated and potentially push the global economy into a recession.
