Donald Trump has signed an order to impose sweeping tariffs on imports from Mexico, Canada and China — fulfilling one of his post-campaign commitments to voters that also carries the risk of sparking higher inflation and disrupting businesses across North America.
Trump’s order also includes a mechanism to escalate the rates if the countries retaliate against the U.S., as they are possibly prepared to do.
The decision throws the global economy and Trump’s own political mandate to combat inflation into possible turmoil, though the Republican president posted on social media that it was necessary “to protect Americans.”
The tariffs risk an economic standoff with America’s two largest trading partners in Mexico and Canada, upending a decades-old trade relationship with the possibility of harsh reprisals by those two nations. The tariffs also if sustained could cause inflation to significantly worsen, possibly eroding voters’ trust that Trump could as promised lower the prices of groceries, gasoline, housing, autos and other goods.
Trump declared an economic emergency in order to place duties of 10 percent on all imports from China and 25 percent on imports from Mexico and Canada. But energy imported from Canada, including oil, natural gas and electricity, would be taxed at a 10 percent rate.
The tariffs would go into effect on Tuesday, setting a showdown in North America that could potentially sabotage economic growth. A new analysis by the Budget Lab at Yale laid out the possible damage to the U.S. economy, saying the average U.S. household would lose the equivalent of $1,170 in income from the taxes. Economic growth would slow and inflation would worsen — and the situation could be worse if Canada, Mexico and China retaliate.
For the moment, Mexico plans to stay cool-headed as it weighs its options.
Mexico President Claudia Sheinbaum, appearing Saturday at an event promoting a government housing program outside Mexico City said, “I’m calm, I’ve been saying since yesterday, because I know that Mexico’s economy is very powerful, very strong.”
A senior administration official, insisting on anonymity to brief reporters, said the lower rate on energy reflected a desire to minimize any disruptive increases on the price of gasoline or utilities. That’s a sign White House officials understand the gamble they’re taking on inflation. Price spikes under former President Joe Biden led to voter frustration that helped to return Trump to the White House last year.
The order signed by Trump contained no mechanism for granting exceptions, the official said, a possible blow to homebuilders who rely on Canadian lumber as well as farmers, automakers and other industries.
The Trump administration put the tariffs in place to force the three countries to stop the spread and manufacturing of fentanyl, in addition to pressuring Canada and Mexico to limit any illegal immigration into the United States.
The official did not provide specific benchmarks that could be met to lift the new tariffs, saying only that the best measure would be fewer Americans dying from fentanyl addiction.
The order would also allow for tariffs on Canadian imports of less than $800. Imports below that sum are currently able to cross into the United States without customs and duties.
“It doesn’t make much economic sense,’’ said William Reinsch, senior adviser at the Center for Strategic and International Studies and a former U.S. trade official. “Historically, most of our tariffs on raw materials have been low because we want to get cheaper materials so our manufacturers will be competitive … Now, what’s he talking about? He’s talking about tariffs on raw materials. I don’t get the economics of it.’’
