Canada and Mexico Avoid New Trump Tariffs, While Border-Related Penalties Remain in Place

“Canada and Mexico, they continue to be subject to the national emergency related to fentanyl and migration,” a White House official said.

President Donald Trump signs an executive order after delivering remarks on reciprocal tariffs during an event in the Rose Garden entitled "Make America Wealthy Again" at the White House in Washington on April 2, 2025. Saul Loeb/AFP via Getty Images

U.S. President Donald Trump unveiled his long-promised plan seeking to rebalance global trade with reciprocal U.S. tariffs on April 2, but didn’t impose new tariffs on Canada and Mexico.

A senior White House official said the initial 10 percent tariff on energy imports from Canada along with the broad 25 percent tariff on goods from Canada and Mexico in relation to illegal migration and fentanyl trafficking will remain in place unchanged. The current exemptions for goods covered by the United States-Mexico-Canada Agreement (USMCA) free trade deal, implemented on March 6, also remain.

“At this time, Canada and Mexico, they continue to be subject to the national emergency related to fentanyl and migration, and that tariff regime will persist while those conditions persist, and they will be subject to that regime, and not the new regimes,” said the official while speaking to reporters before Trump’s announcement.

The official added that if the fentanyl and migration issues are resolved, Canada would default to the new reciprocal tariff regime where USMCA goods would continue to have “preferential treatment” and other goods would have a 12 percent reciprocal tariff.

The new regime imposes a 10 percent baseline tariff rate, effective April 5. Higher rates will be imposed on April 9 for countries that the Trump administration considers the “worst offenders” on trade.

The reciprocal tariffs for other countries include 34 percent on China, 26 percent on India, 24 percent on Japan, 20 percent on the European Union, and 10 percent on the United Kingdom and Australia. The White House said these tariffs are equal to or lower than the tariffs those countries impose on the United States, including “currency manipulation and trade barriers.”

During his speech at the White House on April 2, Trump said the tariffs would be the country’s “declaration of economic independence” and will give the U.S. government trillions of dollars in tariff revenue while bringing jobs and factories “roaring back” to the country. The United States is seeking to address its trade deficit, which stood at over US$918 billion in 2024.

Trump singled out Canada specifically for its supply management system, saying the country imposes tariffs as high as 300 percent for its dairy products. “When you look a little bit, it’s not a pretty picture, and we don’t like it. It’s not fair to our farmers. It’s not fair to our country,” Trump said.

Trump also repeated his previous claims that the United States subsidizes Canada for “close to $200 billion a year” and said the country needs to “work for yourselves.” According to the U.S. Trade Representative, the United States had a trade deficit in goods of US$63.3 billion with Canada in 2024. Canada is the United States’ largest provider of foreign oil, and when those imports are removed from the equation, the United States has a trade surplus in goods with Canada.

Existing Tariffs

The first round of U.S. tariffs placed on Canada and Mexico, related to border concerns, was first imposed in early February and put on a one-month pause shortly afterwards. Canada had introduced several measures in an attempt to avoid those tariffs, including a committing $1.3 billion in investments on border security and listing drug cartels as terrorist entities, while Mexico deployed 10,000 soldiers to its border.

The White House said in February that it had “leveraged tariffs to force Canada and Mexico to make long-overdue changes at our northern and southern borders, ensuring the safety and security of American citizens.”

The Trump administration later deemed these border security measures insufficient, and Trump in early March imposed a 10 percent tariff on Canadian energy and broad 25 percent tariffs on other Canadian goods. However, exemptions for U.S. car manufacturers and goods covered by the USMCA free trade deal followed shortly after, representing 50 percent of U.S. imports from Mexico and 38 percent of Canadian goods.

In mid-March, Trump imposed universal 25 tariffs on foreign steel and aluminum. Canada had retaliated when faced with similar tariffs in 2018 and 2019. That earlier trade dispute was settled after an agreement was reached to crack down on dumping and transshipment by other countries.

Later in March, Trump signed an executive order slapping a 25 percent tariff on automobiles and car parts made outside the United States. Only the portions of finished Canadian vehicles not made in the United States will be impacted by tariffs.

Canada has so far responded by imposing tariffs worth approximately $60 billion in U.S. goods.

The leaders of both main federal parties in Canada support retaliatory measures against the United States and have also signalled their intention to open broader free trade negotiations after the upcoming federal election.

After speaking with Trump on March 28, Prime Minister Mark Carney said that it was a “very constructive discussion” and that the two “agreed to begin comprehensive negotiations about a new economic and security relationship between our two sovereign countries” following the election.

Meanwhile, Conservative Leader Pierre Poilievre said in an April 2 speech that he would propose to start early renegotiations with Trump to replace the USMCA on “day one” if he becomes prime minister. He said the trade agreement must be renegotiated in 2026, “so why not get it done fast.”