The United States stands on the brink of a major trade shake-up as President Donald Trump prepares to impose sweeping 25% tariffs on all imports from Canada and Mexico. The move, set to take effect as early as Saturday, threatens to disrupt nearly $1.6 trillion in annual trade and drive up prices on a broad range of goods, from gasoline and groceries to automobiles and electronics.
Trump has tied the tariffs to his demands that Canada and Mexico take stronger action to curb illegal immigration and the flow of fentanyl into the U.S. "President Trump has a great new tax cut, the largest in history, and tariffs can easily pay for that," said Peter Navarro, Trump's top trade advisor.
The administration has signaled it will invoke the International Emergency Economic Powers Act (IEEPA) to justify the tariffs, citing the fentanyl crisis and border security as national emergencies. The 1977 statute, strengthened after the 9/11 attacks, allows the president to impose economic sanctions in times of crisis without lengthy investigations by the Commerce Department or U.S. Trade Representative's office.
The impact of such tariffs would be widespread, hitting key U.S. imports such as crude oil, aluminum, auto parts, and agricultural products. The move could push gas prices up by as much as 70 cents per gallon in some regions, according to industry experts, as Canada and Mexico supply 70% of U.S. crude oil imports. The cost of fresh produce, including avocados, tomatoes, and bell peppers, could also spike, given that Mexico supplies a dominant share of those products.
Matthew Holmes, public policy chief at the Canadian Chamber of Commerce, warned that tariffs would amount to an economic self-inflicted wound. "President Trump's tariffs will tax America first. From higher costs at the pumps, grocery stores, and online checkout, tariffs cascade through the economy and end up hurting consumers and businesses on both sides of the border. This is a lose-lose."
Mexico and Canada have both vowed to retaliate. Canada's energy and national resources minister, Jonathan Wilkinson, said the country's response would focus on products that "hurt Americans more than Canadians." Reports suggest Canada has already drawn up plans for retaliatory tariffs targeting key U.S. exports, including orange juice from Florida-Trump's adopted home state.
Mexican President Claudia Sheinbaum, while acknowledging the potential economic fallout, expressed skepticism over Trump's resolve. "We don't believe it will happen, honestly," Sheinbaum said, noting that Trump has previously used tariff threats as leverage without following through.
However, Trump's latest push appears to be more than just rhetoric. His administration has signaled that failure to impose tariffs could weaken his negotiating power on border security and trade enforcement. A U.S. trade group executive, speaking anonymously, noted, "If they keep threatening and then don't put them in place, they're going to lose credibility."
The auto industry is among the sectors most vulnerable to the looming tariffs. Canada and Mexico together accounted for nearly $120 billion worth of U.S. motor vehicle imports in 2023, making up nearly half of all imported cars. "The operations of auto companies on both sides of the border will be hugely affected by these tariffs," said Robert Lawrence, a professor of trade and investment at Harvard University's Kennedy School of Government.
Retailers are also bracing for impact. Walmart, Target, and other major chains have already begun preparing for price increases on essential consumer goods. "The scary thing is the list of products is very, very long," said Jason Miller, a professor of supply-chain management at Michigan State University.
The economic effects could be compounded by seasonal factors, particularly in the energy sector. Gasoline prices typically rise in the spring due to increased travel demand, and adding a tariff-induced hike could push costs up by as much as $1 per gallon, according to Timothy Fitzgerald, a professor of business economics at the University of Tennessee.
Beyond economic concerns, Trump's move is expected to further strain diplomatic relations with America's closest trading partners. The United States, Canada, and Mexico had spent years renegotiating the North American Free Trade Agreement (NAFTA), resulting in the United States-Mexico-Canada Agreement (USMCA), which took effect in 2020. Imposing tariffs now would effectively dismantle the free-trade framework that has governed North American commerce for decades.