Washington/New York: U.S. President Donald Trump confirmed that 25% tariffs on imports from Mexico and Canada will take effect on Tuesday, escalating trade tensions across North America and sending global financial markets into a sharp decline.
US President Donald Trump said 25% tariffs on goods from Mexico and Canada will take effect on Tuesday, raising fears of a trade war in North America and sending financial markets reeling https://t.co/03DKvGtaju pic.twitter.com/T5oW5umkGz
— Reuters (@Reuters) March 4, 2025
Trump’s announcement on Monday triggered a selloff in stocks, pushed bond yields lower, and caused the Mexican peso and Canadian dollar to weaken.
“They’re going to have to have a tariff. So what they have to do is build their car plants, frankly, and other things in the United States, in which case they have no tariffs,” Trump said at the White House.
The president ruled out any last-minute deal to prevent the tariffs, emphasizing that Mexico and Canada must do more to curb fentanyl flows into the U.S. Trump also reaffirmed that tariffs on all Chinese imports would rise to 20%, doubling the previous 10% levy as a penalty for Beijing’s failure to stop fentanyl shipments to the U.S.
“China has not taken adequate steps to alleviate the illicit drug crisis,” Trump stated in an official order.
North America Braces for Economic Shock
The tariffs will cover more than $900 billion worth of annual U.S. imports from its two biggest trading partners. The U.S. Customs and Border Protection agency confirmed in a Federal Register notice that the tariffs would take effect at 12:01 a.m. EST (0501 GMT) on Tuesday. Additionally, a 10% duty will be applied to Canadian energy imports alongside the broader tariff measures.
Canada and Mexico Prepare to Retaliate
Canadian Prime Minister Justin Trudeau responded swiftly, confirming that Canada will impose 25% tariffs on C$155 billion ($107 billion) worth of U.S. goods if Trump’s measures proceed.
“Our tariffs will remain in place until the U.S. trade action is withdrawn,” Trudeau stated, adding that the initial C$30 billion in retaliatory duties will take effect on Tuesday, with the remaining C$125 billion set for implementation within three weeks.
Mexico’s economy ministry withheld an immediate response but signaled that President Claudia Sheinbaum will address the issue at her regular press briefing on Tuesday. She has already warned, “We have a plan B, C, D.”
Economic Fallout and Market Reaction
Ontario Premier Doug Ford criticized the tariffs, warning that they could cripple auto manufacturing in both Canada and the U.S.
“I don’t want to respond, but we will respond like they’ve never seen before,” Ford told NBC, predicting that Michigan’s auto plants could shut down within a week and that Canada might halt nickel shipments and electricity exports to the U.S.
The Chinese government also vowed countermeasures, denouncing Washington’s decision as “unreasonable and groundless, harmful to others”. The state-run Global Times suggested that Beijing may target U.S. agricultural and food products in response.
Wall Street Reacts
The markets saw immediate volatility, with major indexes experiencing sharp declines:
- Dow Jones Industrial Average fell 1.48% (-649.67 points)
- S&P 500 lost 1.76% (-104.78 points)
- Nasdaq Composite dropped 2.64% (-497.09 points)
Automaker stocks were particularly hard-hit. General Motors (GM) fell 4%, while Ford saw a 1.7% decline as concerns grew over supply chain disruptions in North America.
Trump’s Expanding Trade War
Mexico’s previous efforts to avoid tariffs—such as deploying troops to its northern border and cracking down on drug cartels—appear insufficient to satisfy the White House. The Centers for Disease Control and Prevention (CDC) reported that 72,776 Americans died from synthetic opioids in 2023, mostly due to fentanyl.
Opposition to Trump’s tariff strategy is growing in the U.S. Representative Suzan DelBene (D-WA) criticized the move, saying it would raise costs for American consumers.
“No president should be able to raise taxes without a vote in Congress,” she said in a statement.
However, White House trade adviser Peter Navarro defended the tariffs, dismissing concerns about inflationary effects.
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“This is the path that he’s chosen,” Navarro told CNBC, adding that inflationary impacts would be minimal.
Trump’s Aggressive Trade Measures Continue
Beyond Canada and Mexico, Trump is escalating tariff pressures worldwide. Over the past month, his administration has:
- Launched a national security probe into lumber and wood imports, potentially leading to further tariffs, particularly impacting Canada’s softwood industry.
- Revived a digital services tax investigation, threatening tariffs on countries that tax U.S. tech firms.
- Proposed fees on Chinese-built ships entering U.S. ports.
- Initiated a new tariff probe into copper imports.
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These actions, combined with the wider U.S. tariff hikes, have raised fears that Trump’s policies could trigger a global economic downturn.
Desmond Lachman, a senior fellow at the American Enterprise Institute, warned that Trump’s aggressive tariffs may drive inflation higher and push the global economy into recession.
“These are tariffs on steroids,” Lachman stated.
