What to know about Trump’s latest tariffs on Canada, Mexico and China

WASHINGTON - President Donald Trump on Feb 1 signed executive orders imposing sweeping tariffs on the country’s three largest trading partners, a move that risks unleashing a damaging trade war.

Trade wars were a feature of Mr Trump’s first term in the White House, too. But his

latest tariffs on Canada, Mexico and China

, which are set to take effect at 12.01am local time on Feb 4, significantly broaden the scale of disruptions. More than one-third of the goods and services imported to or bought from the United States are linked to the three countries, supporting tens of millions of American jobs.

Here’s what to know about the anticipated fallout from the tariffs:

How sweeping are the tariffs?

All goods imported from Canada and Mexico will be subject to a 25 per cent tariff, except Canadian energy products, which will be hit with a 10 per cent tariff, according to the executive orders. The orders also placed a 10 per cent tariff on Chinese goods.

The auto and electric equipment sectors in Mexico are most exposed to disruption from sweeping tariffs, as is mineral processing in Canada, according to economists at S&P Global. In the United States, the largest risks are to farming, fishing, metal and auto production.

What should consumers expect?

US companies will probably respond to tariffs in different ways. Some may try to pass the cost on to their customers by raising prices. Others may opt to eat the cost of the tariff. Companies may also try to force foreign suppliers to bear the burden by negotiating lower prices for their products.

But when Mr Trump imposed tariffs on China during his first term, economic studies found that most of those costs were passed on to American consumers – a scenario that is likely to play out again. That could mean higher prices in grocery aisles, at car dealerships and at the pump.

Roughly 60 per cent of the oil that the United States imports comes from Canada. Tariffs on Canadian energy, though lower than for other imports, could still prompt an uptick in prices at the pump, especially in the Midwest, where refineries turn Canadian oil into fuels like gasoline and diesel.

There is also concern about inflationary pressures across the board. Analysts at Goldman Sachs have said that if Mr Trump proceeds with across-the-board tariffs, it would raise prices in the United States and slow economic growth. Most economists expect that fresh trade barriers could lead to a temporary burst of higher inflation.

How long might it take for prices to rise?

Consumers could see a swift uptick in prices for non-durable goods, including groceries. Most of the avocados in the United States are imported from Mexico, and they could become more expensive within a couple of weeks of the tariffs going into effect. Prices for cucumbers and tomatoes might spike, too. It could take longer for prices to rise for durable goods, like cars, thanks to existing inventory, or if companies expect the tariffs to be temporary.

“It could take a little while, but if these tariffs are there to stay, then these price increases are going to come eventually,” said Dr Felix Tintelnot, an associate professor of economics at Duke University.

How has Mr Trump justified his tariffs?

After taking office, Mr Trump said he would impose tariffs on Canada and Mexico because the neighbouring countries were allowing “mass numbers of people to come in and fentanyl to come in”. His arguments since Inauguration Day – that punishments are necessary to halt the flow of migrants and drugs into the United States – follow months of similar threats during his presidential campaign.

Mr Trump issued the executive orders under a law called the International Emergency Economic Powers Act, expanding the scope of a national emergency that he declared on his first day in office with respect to an “influx of illegal aliens and illicit drugs”.

Canada and Mexico have signalled possible retaliation. The Canadian government has made plans to target orange juice from Florida, whiskey from Tennessee and peanut butter from Kentucky, while Mexican President Claudia Sheinbaum has said her country is prepared to respond with retaliatory tariffs.

“If the United States moves ahead, Canada’s ready with a forceful and immediate response,” Canadian Prime Minister Justin Trudeau said on Jan 31 on social media.

Mr Trump’s executive orders, however, aim to restrict the affected governments’ ability to fight back. The US might ramp up its tariffs if the countries retaliate by imposing their own import duties or taking other measures, according to a clause in the orders.

Have US companies been preparing?

Before Mr Trump’s announcement on Feb 1, US companies did not appear to be making a concerted effort to rush in shipments from Mexico and Canada. But efforts to bring in goods before the tariffs probably contributed to an increase in the transportation of shipping containers across North America by rail in the first four weeks of the year compared with the same period in 2024.

Data before Feb 1 showed modestly higher freight volumes on road and rail. Transportation experts said that for rail and trucking companies, the situation differed from 2021 and 2022, when a deluge of imports overwhelmed supply chains, causing shipping costs to skyrocket and helping fuel a rapid acceleration of inflation. NYTIMES