Hours later, Mexican President Claudia Sheinbaum announced that her country would impose retaliatory tariffs, and Canadian Prime Minister Justin Trudeau also announced a strong retaliatory tariff - a 25% tax on $155 billion worth of US goods. The affected items include wine, agricultural products, clothing, footwear, household goods, furniture, materials such as lumber, and many other items.
According to CNN, Mr. Trump's tariffs are expected to lead to retaliation and could create a trade conflict that will cause significant damage to the economies of the targeted countries and the US economy. The new policy also reverses the nearly tariff-free trade regime between the three North American countries that has existed for many years and is an extension of the trade conflict between China and the US during the last two administrations.
As Trump has promised for months, the new tariffs will be as high as 25% on all imports from Mexico and most goods from Canada, and a 10% tariff on Chinese goods entering the US. There will be no exemptions, and the new policy will also close the “de minimis” loophole that allows shipments worth $800 or less to enter the US duty-free. This is a key provision used by many small US businesses as well as Chinese companies like Shein and Temu. The new tariffs will take effect at 12:01 a.m. ET on February 4.
Economists point out that tariffs could lead to much higher costs, supply chain disruptions and job losses. A Trump administration official said on February 1 that any retaliatory action by Mexico, China or Canada would likely result in even higher tariffs on that country.
Most economists are against tariffs because they fundamentally believe that tariffs cause inflation. This is because the tax is borne by the importer and is often passed on to consumers in the form of higher prices.
New research from the Peterson Institute for International Economics finds that President Trump's aggressive tariff campaign will force American consumers to pay more for almost everything — from foreign-made sneakers and toys to food.
Corporations and business groups remain opposed to the new tariffs announced by the US on February 1. The US Chamber of Commerce strongly criticized Mr. Trump’s tariffs, warning that they would increase consumer prices. The chamber will consult with its members to determine the next steps to prevent economic harm to Americans.
The latest tariffs hit Mexico, China and Canada - the US's three largest trading partners. In 2023, Mexico will surpass China as the top exporter to the US, marking the first time in two decades that China is not the top exporter. Mexico retained its top spot last year, exporting $467 billion worth of goods to the US, followed by China and Canada, with $401 billion and $377 billion, respectively.
According to data from the US Department of Commerce from the beginning of the year to November 2024 - the most recent month for which data is available, these three countries together accounted for 42% of the nearly $3,000 billion in goods that the US imported worldwide last year.
Tariffs on goods from these three countries mean Americans could pay more for a wider range of goods. Cars, auto parts, steel, natural gas, fresh produce, and consumer electronics — major U.S. imports from Mexico, China, and Canada — would become more expensive once the tariffs are fully implemented.
