On Monday, President Trump announced that extensive tariffs on Canada and Mexico would be implemented the following morning, indicating at the White House that a last-minute agreement to prevent these tariffs was not in sight.
“They’re ready to go,” Trump stated. “They’ll be in place tomorrow.”
These tariffs will add a hefty 25% charge to all Mexican and Canadian exports coming into the U.S. borders, along with an extra 10% on Chinese goods.
Trump describes this move as a strategy to pressure these nations into helping curb the influx of illegal drugs and migrants entering the United States. However, these tariffs are poised to have major impacts on companies dependent on global supply chains and are likely to increase costs for American consumers.
Initially, Trump had warned that these tariffs would hit the three countries starting February 4. But he decided to delay the charges on Canada and Mexico by a month after receiving commitments like Mexico boosting its border military presence and Canada appointing a “fentanyl czar.”
Despite this pause, Trump went ahead with implementing a 10% tariff on all Chinese imports, provoking retaliation from Beijing. He now plans an additional 10% tariff on Chinese goods, adding to the previous 10% to 25% tariffs enacted during his first term.
Commerce Secretary Howard Lutnick, speaking on CNN, remarked that both Mexico and Canada had “made good efforts at the border,” although fentanyl-related deaths hadn’t decreased sufficiently.
“The president has choices to make,” Lutnick commented. “He’ll decide this afternoon, and by tomorrow, we’ll activate those tariffs.”
Investors had held onto hopes of a last-minute resolution, but confirmation of the incoming tariffs led to a significant decline in stocks. The S&P 500 dropped over 2%, marking its largest single-day loss this year. Meanwhile, the Russell 200 index, which tracks smaller companies more sensitive to economic shifts, fell by 2.5%. The VIX volatility index, often referred to as Wall Street’s “fear gauge,” jumped to 24, surpassing its long-term average.
Executives and officials worldwide are racing to mitigate the repercussions of these tariffs, which will dramatically raise the expense of importing goods from the United States’ most vital trading partners.
Both Canada and Mexico heavily rely on exports to the U.S., prompting swift responses from their governments to Trump’s threats. Delegations have recently arrived in Washington, including meetings with Lutnick.
Conversely, Chinese officials have not urgently sought to negotiate in Washington. According to sources close to these discussions, Beijing continues to explore Trump’s broader intentions for the bilateral relationship.
Mexico’s President Claudia Sheinbaum, at a Monday press briefing, said discussions with U.S. counterparts had been “very positive,” and that her administration would now await Trump’s decision. Sheinbaum showed a graphic indicating a 49.9% reduction in fentanyl seizures on the U.S.-Mexico border since she took office in October through January.
“We’re prepared with plans A, B, and C,” she explained. “We’ve engaged in thorough communication and made agreements, but ultimately, it hinges on the U.S. President’s decision. Whatever he decides, we’ll also take our appropriate actions.”
The potential for new tariffs, plus other proposed duties on materials like steel, aluminum, copper, and timber, is causing significant concern among businesses—from automobile manufacturers to those making breast pumps—since these tariffs will boost their costs as they transport goods across borders.
Canada, Mexico, and China collectively represent over 40% of U.S. imports. If Trump goes ahead with these tariffs, they would surpass any trade measures he’s previously enacted, potentially bringing U.S. tariff rates to levels “not seen since the 1940s,” suggests Chad Bown, a senior fellow at the Peterson Institute for International Economics.
Trade between the U.S., Canada, and Mexico has mostly enjoyed zero tariffs since the 1980s, with free trade agreements for automobiles stretching back to the 1960s, Bown notes.
“Jumping from zero to a 25% tariff without warning could disrupt those deeply complex North American supply chains more than anything Trump managed in his first term,” Bown said.
This sudden uncertainty is particularly troubling for business owners like Logan Vanghele, a 28-year-old whose company sells aquariums, lighting, and equipment—all sourced from China.
Reporting was contributed by Joe Rennison, Minho Kim, and Paulina Villegas.
