Trump Unleashes 25% Tariffs on Mexico and Canada, Triggering Trade Conflict Concerns and Market Decline

On Monday, President Donald Trump announced that a 25% tariff on goods from Mexico and Canada would take effect on Tuesday, fueling concerns of a potential trade war in North America and causing financial markets to experience a sharp decline. His statement resulted in a significant drop in U.S. stock prices, while both the Mexican peso and the Canadian dollar fell in value.
Trump explained that both countries would face the tariff unless they shifted manufacturing, such as car plants, to the U.S. He also emphasized that there was no room for negotiation to avoid the tariffs, despite talks around curbing fentanyl trafficking into the U.S.
Additionally, Trump revealed that starting April 2, the U.S. would impose reciprocal tariffs on nations that have tariffs on American goods. He reiterated his plan to raise tariffs on Chinese imports from 10% to 20% in response to China’s involvement in the ongoing fentanyl crisis.
Trump criticized China for not doing enough to tackle the opioid epidemic. Many business leaders and economists warned that these new tariffs, affecting over $900 billion in U.S. imports, could severely harm the highly interconnected North American economy.
The tariffs will be implemented at 12:01 a.m. EST (0501 GMT) on Tuesday, with both Canada and Mexico facing a 25% tariff on most goods and a 10% tariff on Canadian energy products. Mexico has not yet commented on the decision.
In response, Canadian Foreign Minister Melanie Joly indicated that Canada was prepared to react. “There’s a level of unpredictability and chaos that comes out of the Oval Office, and we will be dealing with it,” she stated.
The stock market reacted negatively to Trump’s comments, with the Dow Jones Industrial Average dropping by 649.67 points (1.48%), the S&P 500 falling by 104.78 points (1.76%), and the Nasdaq Composite declining by 497.09 points (2.64%). Automakers, particularly General Motors and Ford, saw significant losses due to concerns about supply chain disruptions and rising car prices.
Mexico, which previously avoided tariffs by agreeing to send troops to its northern border, has ramped up efforts to combat drug trafficking and signaled potential new actions against Chinese imports. Mexican President Claudia Sheinbaum reassured the public that the country had contingency plans in place, though she did not provide specific details. The U.S. continues to face a fentanyl crisis, with nearly 73,000 deaths from synthetic opioids in 2023 alone.
Democratic Representative Suzan DelBene criticized the tariffs, stating that they would raise costs for American families. White House trade adviser Peter Navarro, however, downplayed the inflationary impact of the tariffs, claiming that the long-term benefits of the President’s approach would outweigh any short-term consequences.
In addition to these new tariffs, Trump recently announced investigations into lumber and wood product imports, which could result in higher tariffs on Canada, and revived investigations into digital services taxes and copper imports. These actions are part of his broader strategy to impose higher reciprocal tariffs to counter other countries’ trade barriers.
However, some experts, such as Desmond Lachman of the American Enterprise Institute, warned that Trump’s aggressive tariff policies could increase inflation and potentially push the global economy into a recession.