President Trump slaps 25% tariffs on Canada and Mexico, China up next

President Donald Trump has officially greenlit 25% tariffs on imports from Canada and Mexico, starting February 1. The announcement came on Jan. 30 during an Oval event where Trump signed executive orders addressing an unrelated aviation disaster.

His reasons were immigration chaos, deadly drug inflows, and trade deficits. “We’ll be announcing the tariffs on Canada and Mexico for a number of reasons,” Trump told reporters in the Oval Office.

“Number one is the people that have poured into our country so horribly and so much. Number two are the drugs, fentanyl and everything else that have come into the country. Number three are the massive subsidies that we’re giving to Canada and Mexico in the form of deficits.”

Oil and markets get pulled into the disaster

West Texas Intermediate crude jumped past $73 per barrel within minutes of the announcement. The US dollar, which had been struggling earlier, hit its highest point of the day.

Meanwhile, the Canadian dollar and Mexican peso tumbled, while US Treasury yields trimmed their earlier gains. Investors had anticipated a move, but this hit harder than expected.

The 25% rate could be just the starting point. Trump told reporters that the level “may or may not rise with time,” making it clear the door is wide open for increases. But one thing remained uncertain: oil. The president hinted that he was still mulling over whether oil imports would be exempt.

His decision, he said, would depend on price movements. “We don’t need the products that they have. We have all the oil that you need. We have all the trees you need,” Trump added.

The announcement is a major escalation in Trump’s long-running effort to use tariffs as leverage. Markets have been on high alert, especially after Trump’s recent back-and-forth with Colombia, which was pretty hilarious actually.

See, he had threatened tariffs on Colombian imports over a migrant deportation dispute but backed off at the last minute, leaving everyone guessing whether the Canada-Mexico threat was serious. Now we know he was.

China faces the same fate

At the Oval, president Trump confirmed that China is next on his list. Although he didn’t specify a percentage, previous discussions suggest a 10% tariff could be imposed. Trump’s main issue? Fentanyl. He’s been blaming Beijing for failing to block the export of the deadly drug and the chemicals used to make it.

“With China, I’m also thinking about something because they’re sending fentanyl into our country, and because of that, they’re causing us hundreds of thousands of deaths,” Trump said Thursday. “So China is going to end up paying a tariff also for that, and we’re in the process of doing that.”

The administration is already investigating whether China broke its trade deal commitments from Trump’s first term. If the investigation confirms violations, tariffs will be slapped on Chinese imports as well.

Trump has seemingly been getting really close to China’s president Xi Jinping too, so let’s see how that works out for him. He said at his own post-inaugural speech on Jan. 20 that China’s Vice President Han Zheng attended that he “really liked” Jinping.

The economic fallout

Canada and Mexico are two of the United States’ largest trading partners. US trade with Canada hit $699 billion in the first 11 months of 2024, while trade with Mexico hit $776 billion. Trump’s tariffs could hit industries hard, especially the automotive and energy sectors. Shares of Ford and General Motors plunged as soon as the tariffs were announced, erasing earlier gains.

Canadian Ambassador to the US Kirsten Hillman reiterated that Canada would retaliate if the tariffs go into effect. “If these tariffs go into effect, Canada will respond,” Hillman told reporters on Jan. 29. She added that:

“This is not something that we want to do. We do not want to get into a tariff-back-and-forth with the United States. It’s not good for Canada, Canadians and Canadian workers, and it’s not good for the United States, Americans and American workers.”

Hillman pointed out that Canada had already taken steps to address Trump’s border concerns, including deploying more drones, helicopters, and other surveillance measures.

Canadian Prime Minister Justin Trudeau had even visited Trump at his Mar-a-Lago resort before the president’s inauguration to prevent things from escalating.

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