WASHINGTON (AP) — President Donald Trump announced Monday that starting Tuesday, a 25% tariff will be imposed on imports from Mexico and Canada, reigniting concerns of a North American trade war that could fuel inflation and stall economic growth.
“Tomorrow — tariffs 25% on Canada and 25% on Mexico. And that’ll start,” Trump declared to reporters in the Roosevelt Room. “They’re going to have to have a tariff.” He has framed the tariffs as a tool to compel both nations to curb fentanyl trafficking and illegal immigration, while also aiming to correct trade imbalances and lure factories back to the U.S.
The announcement sent shockwaves through Wall Street, with the S&P 500 dropping 2% by Monday afternoon. The move highlights the economic and political gambles Trump is willing to take, risking higher inflation and the potential unraveling of decades of trade cooperation with Mexico and Canada when the tariffs kick in at 12:01 a.m. Tuesday.
Still, the Trump administration insists tariffs are the key to revitalizing U.S. manufacturing and drawing foreign investment. Commerce Secretary Howard Lutnick pointed Monday to TSMC’s expanded U.S. investment as evidence, attributing it to the threat of separate 25% tariffs.
Trump also confirmed that a 10% tariff on Chinese imports, introduced in February, will jump to 20% on Tuesday.
In February, Trump delayed these latest tariffs by a month after Mexico and Canada offered concessions. But on Monday, he declared “no room left” for further leniency, with the new tariffs set to include a reduced 10% rate on Canadian energy exports like oil and electricity.
Canadian Prime Minister Justin Trudeau denounced the tariffs as unjustified. “Americans will pay more for groceries, gas, and cars, and could lose thousands of jobs,” he warned. “Tariffs will upend a highly successful trade relationship and breach the trade deal President Trump himself negotiated last term.”
Trudeau vowed retaliation, announcing 25% tariffs on $155 billion Canadian ($107 billion U.S.) worth of U.S. goods over 21 days, starting with $30 billion Canadian ($21 billion U.S.) Tuesday at midnight.
Mexican President Claudia Sheinbaum, awaiting Trump’s statement, said, “It’s up to the U.S. president. Whatever he decides, we’ll respond accordingly with a plan and unity in Mexico.”
Both nations have taken steps to address Trump’s demands. Mexico deployed 10,000 National Guard troops to the U.S. border to tackle drugs and migration, while Canada appointed a fentanyl czar, despite limited evidence of significant smuggling from its territory.
As recently as Sunday, Trump’s final decision remained uncertain. Lutnick told Fox News Channel’s “Sunday Morning Futures” that the situation was “fluid,” adding, “He’s still weighing how to approach Mexico and Canada. Tariffs are coming Tuesday — the specifics are up to the president and his team.”
Treasury Secretary Scott Bessent revealed Mexico proposed a 20% tax on Chinese imports during negotiations. On CBS News Sunday, Bessent argued China would absorb tariff costs, sparing U.S. consumers and businesses.
Yet companies like Ford and Walmart have cautioned about adverse effects, and studies from the Peterson Institute for International Economics and Yale’s Budget Lab estimate an average family could face over $1,000 in added costs.
Cornell University economist Eswar Prasad warned, “This will disrupt business supply chains and operations, driving inflation and broader economic fallout.”
Democrats swiftly condemned the tariffs. Senate Democratic Leader Chuck Schumer of New York argued that voters rejected inflation last election, “and now Donald Trump is worsening it.” Sen. Amy Klobuchar, D-Minn., predicted rising fertilizer costs for Minnesota farmers, calling the policy “a crazy way to treat allies” while Trump courts Russia.
Trump also plans “reciprocal” tariffs in April to mirror rates charged by other nations, including subsidies and value-added taxes. He has already eliminated exemptions from his 2018 steel and aluminum tariffs and announced new levies on autos, chips, copper, and pharmaceuticals.