President Donald Trump said he planned to enact previously threatened tariffs of as much as 25 per cent on Mexico and Canada by Feb 1, reiterating his contention that America’s two immediate neighbours are allowing the flow of undocumented migrants and drugs into the country.
“We’re thinking in terms of 25 per cent on Mexico and Canada, because they’re allowing vast numbers of people,” into the country, Trump said in response to questions from reporters, as he sat behind the Oval Office’s Resolute Desk on Monday night. “I think we’ll do it February 1.”
Trump’s plans for tariffs on two nations vital for US energy and auto imports threatens to set off a trade war among the signatories of the US-Mexico-Canada Agreement, the successor to Nafta negotiated at Trump’s insistence during his first term. The pact governed the flow of US$1.8 trillion in goods and services trade, based on 2022 data.
Both Canada and Mexico have said they’d retaliate against American goods if Trump slaps tariffs on them. The USMCA is up for review in 2026.
“Canada’s a very bad abuser,” Trump said, complaining about the current of fentanyl and migrants across the northern US border.
The dollar jumped against most major currencies following Trump’s remarks. Bloomberg’s dollar gauge rose as much as 0.7 per cent, the most since Dec 18, as investors sought haven assets. The Canadian dollar and Mexican peso fell more than 1 per cent against the greenback on the news.
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Tariffs of the magnitude that Trump is proposing would spell “disaster” for the US auto industry and Detroit’s carmakers, each of which import a significant number of vehicles from Canada and Mexico, Bernstein analysts said in a November research note. Stellantis NV imports about 40 per cent of the vehicles they sell in the US, while General Motors imports roughly 30 per cent and Ford Motor 25 per cent, they said at the time.
The additional levies would hit about US$97 billion worth of auto parts and 4 million finished vehicles that come into the US from those countries, and could boost average new-car prices by about US$3,000, according to Wolfe Research.
Trump also indicated he was still considering a universal tariff on all foreign imports to the US, but said he was “not ready for that yet.”
“You’d put a universal tariff on anybody doing business in the United States, because they’re coming in and they’re stealing our wealth,” he said, adding that implementation could be “rapid.”
In a Nov 25 post on Truth Social, Trump warned he’d impose 25 per cent tariffs on all Mexican and Canadian imports as “one of my many first Executive Orders” and said it “will remain in effect until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop this Invasion of our Country!”
Those tactics set off a scramble in Mexico City and Ottawa to demonstrate to the incoming president that both governments were addressing his concerns.
Within days, Prime Minister Justin Trudeau, who has since said he’s stepping down, flew to Florida to impress upon Trump that the number of migrants who cross the country’s border into the US is small, and that Canada is also working closely with the US to stop drug smuggling.
Canada has also drawn up an initial list of US$105 billion of US-manufactured items that it would hit with tariffs if the first salvo comes from Trump, who has taunted Canadians with an invitation to become the 51st US state.
“None of this should be surprising. The one thing we’ve learned is that President Trump at moments can be unpredictable,” Dominic LeBlanc, Canada’s finance minister, told reporters shortly after Trump’s comments.
The Canadian government will keep talking about border security and other issues with the Trump administration, LeBlanc said. “In our conversation with American officials, we have spoken about our shared commitment to the fight against fentanyl, to ensuring that immigration is orderly and legal.”
In December, Trudeau’s government presented a plan to spend about US$1 billion on additional measures such as more helicopters and drones for near the border.
Mexico has sought to avoid the imposition of tariffs, taking actions to placate Trump including seeking to reduce imports from China and carrying out a record fentanyl seizure.
Mexican President Claudia Sheinbaum’s government has said the tariffs could affect the US$800 billion of annual trade between the countries and would potentially drive inflation in the US. BLOOMBERG
