President Donald Trump’s long-awaited tariffs on Canada and Mexico have gone into effect, while U.S. levies on China doubled.
Beginning on March 4, goods imported from the North American neighbors will be slapped with 25 percent tariffs, the president confirmed.
Last year, the U.S. economy imported nearly $1 trillion worth of goods from the nation’s two top trading partners.
Hopes for a last-minute pivot were dashed when the president confirmed to the press at a March 3 White House event that there was “no room left for Mexico or for Canada.”
“So, they’re gonna have to have a tariff,” Trump said. “[The tariffs are] all set. They go into effect tomorrow.”
He referenced the lives lost to the “vast amount of fentanyl” that has flowed into the United States as justification for the latest trade measure.
“It comes in from Canada, and it comes in from Mexico, and that’s an important thing to say,” the president stated.
In an interview with CNN on March 3, Commerce Secretary Howard Lutnick commended the job Canada and Mexico have been doing to curb the flow of illegal immigrants but urged the two countries to do more to stop the movement of fentanyl coming into the United States.
“He knows they’ve done a good job on the border. They haven’t done enough on fentanyl,” Lutnick said.
Meanwhile, the administration has not signaled that it will approve more exemptions or exceptions to the new tariffs in addition to Canada’s oil and gas industry, which faces a reduced rate of 10 percent tariffs.
Trump stated that manufacturers can avoid paying tariffs by building “their car plants, frankly, and other things in the United States.”
He further indicated that more tariffs were on the horizon, alluding to his reciprocal tariff plan. This initiative will increase U.S. tariff rates to match the levels instituted by other nations. But it will also go beyond import duties by focusing on regulatory and other non-tariff trade barriers.
Canada Officials Respond
Canadian officials quickly responded to the news.Foreign Minister Melanie Joly confirmed that the federal government is prepared to initiate retaliatory duties that Prime Minister Justin Trudeau outlined in February.
The first set includes 25 percent tariffs on more than $20 billion worth of U.S. goods, including coffee, orange juice, and wine. The second round will feature additional levies on about $86 billion of products, including automobiles, trucks, steel, and aluminum.
“We know that this is an existential threat to us, and there are thousands of jobs in Canada at stake,” Joly said. “Should the U.S. decide to launch their trade war, we will be ready. We are not looking for this. We’re not seeking this.”
Newly reelected Ontario Premier Doug Ford threatened to cut off electricity traveling from his province to several U.S. states.
Ontario is a substantial electricity exporter to Michigan, Minnesota, and New York.
The province will also remove U.S. alcohol from its shelves and cancel all contracts with Starlink, Elon Musk’s satellite internet company, Ford said.
Before Trump’s tariffs were set to go into effect, Canada’s central bank, business groups, and bank economists warned of the significant impact these trade measures would have on the Canadian economy.
Tiff Macklem, the Bank of Canada chief, warned that the country would endure a “structural change” as broad-based tariffs would “wipe out growth.”
“With exports to the United States accounting for roughly one-quarter of our national income, the shock would be felt across Canada.”
Energy-rich Alberta would be the most impacted since it exports crude oil, natural gas, agricultural goods, and other key products to the United States. New Brunswick would also be devastated because it is the largest crude oil refinery in the country, exporting an estimated 256,000 barrels of processed oil per day south of the border.
Several cities in Southwestern Ontario would experience sizable economic pain. Brantford, Guelph, Hamilton, Kitchener, and Windsor conduct billions in bilateral trade in car and auto parts, steel, machinery, equipment, and other advanced manufacturing.
Matthew Holmes, chief of public policy at the Canadian Chamber of Commerce, says that in the future, Canada and the United States “will have a long road back” to resuscitating their economic partnership.
Market Reaction
The financial markets cratered to kick off the trading week as the three major averages suffered sharp selloffs.The blue-chip Dow Jones Industrial Average plummeted 649.67 points, or 1.48 percent, to 43,191.24. The tech-heavy Nasdaq Composite Index declined 497.09 points, or 2.64 percent, to 18,350.19. The S&P 500 shed 104.78 points, or 1.76 percent, to 5,849.72.
Investors had largely shrugged off the president’s tariff talk and realized it was more than a Trump 2.0 negotiating tactic, says Chris Zaccarelli, the CIO for Northlight Asset Management.
“The caution we have been advocating all year has largely been ignored by the market, but nothing that is happening today is a surprise—these tariffs were well telegraphed but investors haven’t been willing to believe Trump was serious, even though he has said many times that this was what he was going to do,” Zaccarelli said in a note emailed to The Epoch Times.
He thinks there could be more downside risk in the stock market as traders start pricing in the potential tariff-fueled economic impact.
While tariffs may not be helping the economy as it’s currently structured, Mark Malek, the CIO at Siebert Financial, believes eroding consumer confidence could be more of a problem.
“Confidence down leads to spending down, which leads to lower or negative GDP growth,” Malek said in an emailed note to The Epoch Times.
“Remember, confident consumers consume, and consumption drives economic growth.”
Despite recession talk returning to Wall Street, ITR Economics analysts do not believe the United States is headed for a trade-driven downturn.
