Trump Tariffs Retaliation by Canada & Mexico: Trade War Details

President Donald Trump finally made good on his promise to impose steep duties on Canada and Mexico, prompting near-immediate backlash from two of the United States’ most prominent trade partners.

As expected, Trump signed an executive order on Saturday levying 25 percent duties on both countries, along with a lower, 10 percent duty rate for Canadian energy exports and an additional 10 percent tariff on China-made goods. The tariffs will take effect Tuesday.

Notably, the order contains language specifying that the de minimis trade exemption — which allows shipments worth less than $800 to enter the country duty-free — is now closed for products subject to the tariffs. Trump leveraged the 1977 International Emergency Economic Powers Act, which grants the president broad authority to regulate a multitude of economic transactions including trade with other countries following the declaration of a national emergency.

“This was done through [IEEPA] because of the major threat of illegal aliens and deadly drugs killing our citizens, including fentanyl. We need to protect Americans, and it is my duty as president to ensure the safety of all,” Trump wrote on Truth Social following the White House announcement.

Canadian Prime Minister Justin Trudeau wasted no time in introducing 25 percent retaliatory duties targeting about $155 billion in American-made products, from alcohol and produce to apparel, footwear, sporting goods, fragrances, home goods and furniture.

“I think Canadians are a little perplexed as to why our closest friends and neighbors are choosing to target us instead of so many other challenging parts of the world,” he said during a somber address to Canadian press just hours after Trump’s executive order.

Trudeau said blocking energy exports to certain U.S. states that rely on Canadian power is a potential course of action still under discussion. Nonetheless, he struck a conciliatory tone, seemingly seeking to reassure Canadians while keeping an olive branch extended in the direction of the White House.

“I think there are going to be people who are upset and even hurt by what’s gone on here, but I have faith; I have faith in Canadians, but I also have faith in the friendship between Canada and the United States,” he said. “It has gone through challenging times before, but we always make it through because we’ve been able to count on each other for over 150 years, and we will continue to be able to do that long into the future.”

Amid the trade battle, Trudeau urged Canada’s citizens to buy goods made at home. “Now is the time to choose products made right here in Canada,” he said. “Check the labels. Let’s do our part. Wherever we can, choose Canada.”

Mexican President Claudia Sheinbaum did not equivocate in her defense of Mexico, announcing her intention to levy retaliatory duties against the U.S.

The leader said she rejects Trump’s slander against the Mexican government — which he has accused of being in bed with the cartels — as well as “any intention of intervention in our territory.” Last week, Trump intimated that the U.S. could send special operations forces into Mexico to combat criminal enterprises.

“Mexico does not want confrontation. We start from collaboration between neighboring countries. Mexico not only does not want fentanyl to reach the United States, but anywhere. Therefore, if the United States wants to combat criminal groups that traffic drugs and generate violence, we must work together in an integrated manner, but always under the principles of shared responsibility, mutual trust, collaboration and, above all, respect for sovereignty, which is not negotiable,” she said.

“I instruct the secretary of economy to implement Plan B that we have been working on, which includes tariff and non tariff measures in defense of Mexico’s interests. Nothing by force; everything by reason and right,” she added.

As of Sunday, Sheinbaum’s government had not released a finalized plan for Mexico’s retaliatory tariffs.

China, too, defended its position, saying its government “firmly deplores and opposes this move and will take necessary countermeasures to defend its legitimate rights and interests.”

“China’s position is firm and consistent,” a China Foreign Ministry spokesperson said Sunday. “Trade and tariff wars have no winners. The U.S.’ unilateral tariff hikes severely violate WTO rules. This move cannot solve the U.S.’ problems at home and more importantly, does not benefit either side, still less the world.”

“The U.S. needs to view and solve its own fentanyl issue in an objective and rational way instead of threatening other countries with arbitrary tariff hikes,” they added. “China calls on the U.S. to correct its wrongdoings, maintain the hard-won positive dynamics in the counternarcotics cooperation, and promote the steady, sound and sustainable development of the China-U.S. relationship.”

Foreign officials weren’t the only ones with something to say about Trump’s weekend tariff offensive. U.S. economic experts and business leaders bemoaned the impact the added duties could have on sourcing strategies and prices at retail.

U.S. Chamber of Commerce senior vice president and head of international business John Murphy said, “The president is right to focus on major problems like our broken border and the scourge of fentanyl, but the imposition of tariffs under IEEPA is unprecedented, won’t solve these problems, and will only raise prices for American families and upend supply chains.”

Murphy said the chamber plans to consult with its members as well as “main street businesses” across the country that will be impacted by the duties in order to “determine next steps to prevent economic harm to Americans.”

Michael Hanson, senior executive vice president of public affairs for the Retail Industry Leaders Association, which represents more than 200 U.S. retailers, manufacturers and service suppliers, expressed hope that the world leaders can come together in support of a resolution before the tariffs take effect.

“We understand the president is working toward an agreement,” he said. “The leaders of all four nations should come together and work to reach a deal before Feb. 4 because enacting broad-based tariffs will be disruptive to the U.S. economy.”

“The American people are counting on President Trump to grow the U.S. economy and lower inflation, and broad-based tariffs will put that at risk,” Hanson added.

American Apparel and Footwear Association senior vice president of policy Nate Herman said Trump’s decision is a move in the opposite direction of effective trade policy.

“During this time of high inflation, this is not the time to impose new costs on U.S. supply chains. Instead, our industry needs tariff relief and commitment to smart trade policy and strong trade partnerships,” he added. “We need to renew expiring and expired trade preference programs with our allies and strengthen the competitiveness of our free trade agreement with Central America to stem the tide of migration.” 

Economists largely believe new tariffs will exacerbate the effects of lingering inflation.

“Research has shown that importing businesses and their domestic consumers bear the costs of tariffs, not the exporting nation,” said New Tax Policy Center analysis released Friday. The 25 percent duties on Mexico and Canada could cause average annual household incomes to fall by about 1 percent, or $930, in 2026. The lowest-income 20 percent of households “would be worse off by an average of $170 while the wealthiest quintile by an average of $3,280 in that year,” the group’s research said.

As America’s biggest trading partner, Mexico exported $475 billion in goods to the U.S. in 2023. About $5.1 billion of that output was apparel, making America the country’s biggest export partner for fashion. The same year, the U.S. imported about $419 billion in goods from its third largest trading partner, Canada, including $1.73 billion in clothing.

The administration nonetheless sought to downplay the importance of trade as a contributor to the U.S. economy, saying it only accounts for 24 percent of the country’s gross domestic product (compared to 67 percent of Canada’s GDP and 73 percent of Mexico’s GDP). The White House also pointed to the U.S. trade deficit, which it said was “the world’s largest” at more than $1 trillion in 2023.

“This will be the golden age of America! Will there be some pain? Yes, maybe (and maybe not!),” Trump wrote on Truth Social Sunday. “But we will make America great again, and it will all be worth the price that must be paid. We are a country that is now being run with common sense — and the results will be spectacular!!!”