President Donald Trump said that tariffs on goods from Mexico and Canada would go into effect Tuesday, ending a month-long delay and sending stock prices into a swift decline.
On Wall Street on Monday, the Dow Jones Industrial Average closed down around 1.5 percent, as investors digested Trump’s comments. The broader S&P 500 index fell nearly 2 percent. Both market measures are now in the red since Trump’s election win.
Imposing tariffs on everything Americans buy from Mexico and Canada is an extraordinary political gamble by a president who was returned to power by voters angered over years of high inflation. The new import taxes are likely to raise the market prices of Mexican tequila, beer and avocados, along with Canadian crude oil and lumber, testing consumer patience with Trump’s approach.
Tariffs on China will also increase by an additional 10 percentage points for the second time in two months, bringing the total tax on some Chinese products to 45 percent.
“Tomorrow, tariffs — 25 percent on Canada and 25 percent on Mexico. And that’ll start,” Trump told reporters. “So they’re going 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’s midafternoon announcement in the Roosevelt Room drew a rapid response from business groups, unions and the affected trading partners. Statements of opposition came from the National Foreign Trade Council, the Distilled Spirits Council and the International Association of Machinists.
Even some supporters of the president’s overhaul of trade policy were critical: “Tariffs are great when they stop unfair trade that could hurt U.S. producers and workers, but we have balanced trade with Canada, and tariffs don’t affect smuggled stuff like fentanyl,” said Lori Wallach, director of the Rethink Trade program at the American Economic Liberties Project.
Many analysts are skeptical of their long-term prospects: “This action effectively destroys the United States-Mexico-Canada Agreement (USMCA), disrupts the integrated North American economy we have spent decades building and forces American manufacturers to scramble to restructure their supply chains,” said William Reinsch, a trade specialist at the Center for Strategic and International Studies. “Meanwhile, the economy will be disrupted, consumers will pay higher prices, inflation will resume, and workers and farmers will lose their jobs, due to the inevitable retaliation.”
Both Canada and Mexico have vowed to hit back. The Canadian government plans to retaliate with levies on as much as $107 billion worth of U.S. goods, including oranges from Florida, motorcycles from Pennsylvania and home appliances from Ohio. The goal is to maximize pain in electoral swing states or those home to Trump supporters.
Several Canadian provinces have said they will implement their own retaliatory measures, including pulling U.S. alcohol from shelves and limiting procurement opportunities for U.S. firms. Ontario Premier Doug Ford has promised to cancel a nearly $70 million contract with Elon Musk’s Starlink and threatened to cut electricity exports to several U.S. states.
China already has imposed retaliatory tariffs on U.S. exports of farm machinery, coal and liquefied natural gas in response to the additional 10 percent tariff Trump put on Chinese goods early last month. His action Monday, citing China’s continued shipments of fentanyl precursors, added an additional 10 percent levy.
Trump is dismissive of the effect of tariffs on prices and inflation, claiming wrongly that foreign countries will pay the tab while acknowledging that Americans may feel “some pain.” The tariffs will cost the typical American household $1,200 each year, according to a separate analysis by economists at the Peterson Institute of International Economics. As a share of after-tax income, that is three times what the top 1 percent of households will pay.
Factories experienced “the first operational shock of the new administration’s tariff policy,” said Timothy Fiore, chair of the Institute for Supply Management’s manufacturing survey committee.
The ISM Manufacturing Purchasing Managers Index for February was 50.3, down from 50.9 the month before, and below Wall Street’s expectations. Input prices rose at their fastest pace since mid-2022, when consumer price inflation was at a 40-year high.
“Prices growth accelerated due to tariffs, causing new order placement backlogs, supplier delivery stoppages and manufacturing inventory impacts,” Fiore said. “Although tariffs do not go into force until mid-March, spot commodity prices have already risen about 20 percent.”
Since taking office six weeks ago, Trump has threatened or imposed tariffs on the top three U.S. trading partners; commodities such as steel, aluminum and copper; and products like pharmaceuticals, automobiles and semiconductors. And he has announced a comprehensive rethinking of U.S. tariffs that would match other countries’ tax rates on specific products in a “reciprocal” approach.

Donald Trump has pledged to impose tariffs on overseas agricultural goods within weeks, as the White House mulls whether to make good on a threat to hit Canada and Mexico with steep duties from Tuesday.
The US president claimed his administration would introduce tariffs on farm products from 2 April.
A string of such deadlines – including vows to hit Canada and Mexico with tariffs in January, and then February – have been delayed, however, as economists and business urge caution.
“To the Great Farmers of the United States: Get ready to start making a lot of agricultural product to be sold INSIDE of the United States,” Trump wrote on Truth Social, his social network, on Monday. “Tariffs will go on external product on April 2nd. Have fun!”
On Tuesday, Trump has said the US will impose a 25% tariff on Canada and Mexico, and an additional 10% tariff on China, on top of the 10% tariff it imposed on China last month.
These duties “will, indeed, go into effect, as scheduled”, he declared last week, until the fentanyl crisis “stops, or is seriously limited”.

@Sven, Atlanta Fed GDPNow provides a real-time estimate of the GDP. Normally, 2025/Q1 GDP would be released few weeks after the quarter-end, initial reading and then subsequent revisions - so, Spring/Summer.
But it's concerning that Atlanta Fed's and Piper Sandler estimates for 2025/Q1 GDP have changed to negative from positive - those are big swings for GDP.
But the discussion then will be is it just 1 negative quarter on technical tariff factors, or more serious - recession is defined as negative GDP for 2 successive quarters. That won't be known until Fall.
This is something to watch. https://fred.stlouisfed.org/graph/?g=1E6eR

How I Trade for a Living, by Gary Smith, 1999