Trump threatens 25% tariffs on Mexico and Canada to raise prices for Americans
Washington, Jan 21 (IANS/WISHAVWARTA) US President Donald Trump said in an Oval Office signing ceremony on Monday that his administration will impose 25 per cent tariffs on Mexico and Canada on February 1, an extraordinary change in North American trade policy that could raise prices for American consumers.
Trump still outlined his broader trade policy for his second term in an executive action on Monday. But that action — described by sources as a “placeholder” — doesn’t institute the new global tariffs that Trump promised on Day One.
As a candidate, Trump proposed sweeping and across-the-board tariffs: up to 20 per cent on imports from all countries, with a 25 per cent tax on goods from Mexico and Canada, plus a punishing 60 per cent levy on goods from China. He also pledged to use tariffs as a negotiating tool on other countries, including, for example, Denmark — putting pressure on the European nation to give control of Greenland to the United States.
Asked on Monday at an Oval Office signing ceremony about tariffs on China, Trump noted extensive tariffs he imposed during his first administration were still in effect after former President Joe Biden largely left them in place.
And on universal tariffs, Trump punted, saying, “We may, but we’re not ready for that just yet.”
Mexico and Canada are two of America’s top three trade partners. Last year, the US imported $475 billion worth of goods from Mexico and $418 billion from Canada, collectively accounting for 30 per cent of the value of all the goods the US exported last year, according to federal trade data.
Meanwhile, the US exported $354 billion worth of goods to Canada last year and $322 billion to Mexico, accounting for a third of the value of all goods the US exported last year. The tariffs Trump intends to place on both countries likely will raise the prospect that the two impose retaliatory tariffs on US goods, potentially hurting domestic businesses.
The executive action signed on Monday directed the secretaries of Commerce and Treasury and the United States Trade Representative to investigate the causes of America’s trade deficits with foreign nations, to determine how to build an “External Revenue Service” to collect tariffs, to identify unfair trade practices and to review existing trade agreements for potential improvements.
It also directs the government agencies to analyse how the US-Mexico-Canada trade agreement (the USMCA) signed by Trump in his first term is affecting American workers and businesses — and whether America should remain in the free trade agreement.
Trump’s action requires agencies to assess whether stricter US trade policy could successfully restrict the flow of fentanyl and the flow of undocumented migrants into the United States.
“Americans benefit from and deserve an America First trade policy,” Trump’s executive action said.
“Therefore, I am establishing a robust and reinvigorated trade policy that promotes investment and productivity, enhances our Nation’s industrial and technological advantages, defends our economic and national security, and — above all — benefits American workers, manufacturers, farmers, ranchers, entrepreneurs, and businesses.”
The placeholder action comes as Trump’s economic team has been meeting regularly to chart a path to implement the steep, sweeping tariffs on allies and adversaries alike that the President promised on the campaign trail.
Although administration officials continue to debate how to make good on his pledges, Trump in his inaugural address made clear he still plans to make significant changes on tariff policy — in one form or another.
US President Donald Trump speaks during inauguration ceremonies in the Rotunda of the US Capitol on January 20, 2025, in Washington, DC.
“I will immediately begin the overhaul of our trade system to protect American workers and families,” Trump said in his speech in the US Capitol Rotunda on Monday.
“Instead of taxing our citizens to enrich other countries, we will tariff and tax foreign countries to enrich our citizens.”
Trump also said in his address he would establish a new government office called “the External Revenue Service,” which will be tasked with collecting tariff revenue.
“It will be massive amounts of money pouring into our Treasury coming from foreign sources,” Trump said.
Market-minded officials like Scott Bessent, Trump’s pick for Treasury secretary, and Kevin Hassett, his pick to lead the National Economic Council, have advocated for a softer approach. Tariff champions such as Peter Navarro, a White House trade adviser, and Howard Lutnick, Trump’s pick to lead the Commerce Department, have argued the full bore is needed to send the message Trump wants.
Trump, for his part, has been calling allies on Capitol Hill to shore up support for tariffs. But the specific policy has yet to be decided.
But those tariffs could raise costs for Americans who are weary from years of high inflation. Tariffs are paid by American companies that import foreign goods, but those costs typically get passed on to consumers in the form of higher prices.
