U.S. President Donald Trump has announced new tariffs on imports from Canada, Mexico, and China, citing concerns over illegal immigration and drug trafficking. The tariffs, scheduled to take effect on Tuesday, will impose a 25% levy on goods from Canada and Mexico, and a 10% tax on Chinese imports. Canadian energy products, however, will face a reduced 10% tariff. These tariffs could threaten the $1.6 trillion in trade conducted annually between Canada, Mexico, and the U.S.
The new tariffs risk undermining the United States-Mexico-Canada Agreement (USMCA), which entered into force on July 1, 2020. The USMCA was designed to modernise trade between the three countries and strengthen their economic ties. The proposed tariffs notably exclude no exemptions for fresh produce, despite the fact that Mexico and Canada account for a substantial portion of U.S. imports of fresh food. In 2023, Mexico supplied 51% of U.S. fresh fruit imports, while Canada contributed 2%. For fresh vegetables, Mexico supplied 69% and Canada 20%, in terms of value. Together, these countries make up nearly half of all U.S. agricultural imports, including two-thirds of U.S. vegetable imports.
“The Border Trade Alliance welcomed the USMCA, which brought U.S. trade policy into the 21st century and solidified North America’s competitive position in global trade,” said Pete Sepulveda Jr., Chairman of the Border Trade Alliance. “However, imposing tariffs on the U.S.’s neighbours and key trade partners is a major step backwards. These tariffs will force domestic prices to rise, undermining the president’s goal of reducing inflation, and could provoke retaliatory tariffs that may cost American jobs,” added Ms. Britton Mullen, President of the Border Trade Alliance.
Despite Trump’s claims that the tariffs would help lower costs for American consumers, economists and food industry experts warn that they will likely worsen U.S. food inflation, particularly on meat, vegetables, and fruit. With beef prices already at near-record highs and egg prices rising due to bird flu outbreaks, the additional tariffs will place further strain on household budgets. The National Grocers Association criticised the move, calling it a “food tax” on consumers. Importers, who are typically responsible for paying tariffs, usually pass those costs down to consumers through higher prices or reduced business profits. “We import most of our fresh fruit and vegetables from Mexico and Canada, so you will definitely see inflation on these products,” said Rob Fox, an economist and director of CoBank’s Knowledge Exchange. “These are products that are not easily replaced,” he added. “You can’t just grow tomatoes in Illinois in January and expect to replace them.”
In retaliation, Canada, Mexico, and China have vowed to take swift countermeasures. Canada plans to impose matching 25% tariffs on $106.6 billion worth of U.S. goods, including alcohol, household appliances, and sporting goods. Products such as fruit and fruit juices, including orange juice from Trump’s home state of Florida, will also be subject to the tariffs. Mexico is preparing its own response, with President Claudia Sheinbaum rejecting U.S. claims that her government is aligned with drug cartels. Meanwhile, China has condemned the tariffs but has yet to specify its response.
Economists have warned that escalating tariffs could spark a global trade war, raising prices on a wide range of goods, including cars, steel, lumber, food, and housing. U.S. industry groups, including automakers and farmers, have expressed concerns about the potential economic repercussions. The car manufacturing sector, heavily reliant on cross-border supply chains, could face a $3,000 increase in vehicle prices. Housing costs could also rise due to tariffs on building materials.
Trump has justified the tariffs under the International Emergency Economic Powers Act, attributing the need for action to China’s role in fentanyl exports and Mexico’s links to cartel-driven drug trafficking. He has suggested that the tariffs will remain in place until both Canada and Mexico enhance their border security cooperation.