US businesses are enduring the impact of President Trump's new tariffs on Canadian and Mexican goods.
After months of threats and deadlines, Trump said Monday it would proceed with implementing a 25% import tax on goods from Canada and Mexico. The new tariffs, scheduled to take effect Tuesday, will mark a dramatic turning point in relations between the United States and its two closest trading partners.
Before the tariffs were announced, he was asked if there would be more opportunities for negotiations with top trading partners in Canada and Mexico, Trump said he wasn't. He originally promised tariffs on January 20th and early February.
But the round-trip nature of Trump's tariff threat has left business leaders breathing and planning major changes if the president opens up the North American trade war.
This latest policy reversal has led to uncertainty in the corporate executive office about where companies should invest.
“Like other Trump tariff announcements so far, it's difficult to know if this is a bluff or a real policy,” JP Morgan US economist Michael Ferroli and others wrote in an analysis Monday.
“Or at least the tariffs in Canada and Mexico could be delayed again until April 1 when the administration is scheduled to release the trade reports it requested in his first day's executive order.”
Canadian Prime Minister Justin Trudeau announced Monday night that his country would escalate a 25% mutual tariff on US goods if Trump advances import taxes. Ontario Premier Rob Ford went a step further and pledged to cut off energy exports to the United States if Canadians face new tariffs.
Many businesses and trade groups say tariffs can increase costs for businesses and lead to higher prices for consumers.
One analysis by Anderson Economic Group, the automotive sector with highly integrated production lines across the North American border, predicts that the cost per vehicle for a 25% tariff could be up to $12,000.
Others suggest that tariffs can take a sip from Gross Domestic Product (GDP).
“The 25% tariffs in Canada and Mexico can present a point drug of 0.4-0.7% on the real GDP forecast at baseline 2025, if sustained.
Commerce Secretary Howard Lutnick paved the way over the weekend for Trump's announcement, but he overturned orders on tariffs in the past, giving Trump some wiggling room.
“I think there will be tariffs in Mexico and Canada on Tuesday. I'm going to leave it for the president to decide,” he said on Fox News. “He's going to set them up on Tuesday. Canadians and Mexicans have been talking to him.”
Trump sounded a little more open to continuing trade negotiations with China. An additional 10% tariff on top of the already established 10% tariffs could also come into effect on Tuesday.
Trump refused to say how high the tariffs they collect on US importers of Chinese goods. It depends on whether they depreciate the currency or not.
“It depends on what they do with currency,” he said. “It depends on what they do when it comes to retaliation. …I don't think they're going to retaliate much.”
Trump is threatening tariffs on the top three US trading partners, China, Mexico and Canada, on the grounds that the country is effectively contributing to fentanyl imports into the US and exacerbating the country's opioid crisis.
Liu Pengyu, a spokesman for the Chinese Embassy, called the debate a “pretence” to threaten China.
“The US is again using the fentanyl issue as an excuse to threaten China with additional tariffs on exports to the US,” he said in an email to the hill.
“Unsolicited customs hikes by the US are [World Trade Organization] It hurts the rules and the interests of both countries and the world,” he added.
Trump also said retaliatory tariffs are set to come into effect on April 2.
Trump posted a warning to farmers on social media on Monday, telling them to prepare to reduce export opportunities.
“To the great farmers of the United States: Be prepared to start making many produce for sale within the United States. Tariffs will be posted on external products on April 2nd. Enjoy!” he wrote.
The hill reached the White House and details were received.
Trump imposed the first 10% tariff on Chinese imports on February 4th. China is 10% and 15% In addition to new export restrictions and designation of blacklisted companies, tariffs on imports from the US – primarily in the agriculture and energy sectors.
Trump cancelled China's tariff exemption for imports under $800 in early February, but he quickly reversed the order and stacked the packages at John F. Kennedy International Airport after it proved unfeasible.
He recovered the exemption by waiting for “appropriate system” installments to address the strengthened trade restrictions.
Asked about the systems it is implementing to address additional testing requirements, the U.S. Customs and Border Protection (CBP) emphasized the flexibility of the agency.
“The dynamic nature of our mission, along with evolving threats and challenges, requires CBP to adapt quickly while maintaining flexibility and ensuring seamless operation and mission resilience,” CBP said in an email to the hill.
