President Donald Trump, speaking during a Monday evening Oval Office signing ceremony, announced his administration’s plan to impose 25% tariffs on Mexico and Canada starting February 1. This shift in North American trade policy could increase costs for American consumers and represents a dramatic pivot in the region’s trade dynamics.
Although Trump signed an executive action outlining his broader trade policy for his second term, the measure stops short of implementing the sweeping global tariffs he pledged during his campaign. The executive order, described as a “placeholder” by insiders, defers new universal tariffs, which Trump had promised to introduce on his first day in office.
Campaign Promises vs. Current Actions
During his campaign, Trump proposed extensive tariffs, including a 25% levy on goods from Mexico and Canada, a 60% tariff on Chinese imports, and a universal 20% tariff on all countries. He also suggested using tariffs as leverage in negotiations with countries like Denmark, mentioning Greenland’s potential transfer of sovereignty to the U.S.
At Monday’s ceremony, Trump acknowledged existing tariffs on Chinese goods remain in place but delayed any new global tariff implementation, stating, “We may, but we’re not ready for that just yet.”
The executive order directs the Commerce and Treasury secretaries, along with the U.S. Trade Representative, to investigate trade deficits, identify unfair trade practices, and review agreements like the U.S.-Mexico-Canada Agreement (USMCA). It also seeks analysis on whether stricter trade policies could address fentanyl trafficking and undocumented migration.
A “New Era” in Trade
In the executive order, Trump declared his vision for an “America First” trade policy that prioritizes U.S. workers, manufacturers, and businesses. “We will tariff and tax foreign countries to enrich our citizens,” he said during his inaugural address, emphasizing a commitment to reshaping trade practices.
The order also introduced plans for a new agency, the “External Revenue Service,” designed to collect tariff revenue. Trump claimed the initiative would funnel “massive amounts of money” into the U.S. Treasury.
Pushback and Economic Risks
Experts warn the proposed tariffs could have widespread repercussions. Critics, including Judge Glock of the Manhattan Institute and Clark Packard of the Cato Institute, argue the move risks violating USMCA terms and could discourage future trade agreements. They also fear economic backlash, with consumers bearing the brunt of increased prices for imported goods like electronics, toys, and food.
Market-focused members of Trump’s economic team, such as Treasury Secretary nominee Scott Bessent, favor a gradual or measured approach, while proponents like Peter Navarro argue for immediate, aggressive tariffs to signal U.S. resolve.
Mexico and Canada, two of America’s largest trading partners, account for nearly a third of U.S. imports and exports. Experts predict retaliatory tariffs from these nations could harm U.S. businesses, especially in industries like agriculture, manufacturing, and transportation.
Economic Implications
Trump’s tariffs are expected to exacerbate inflation and potentially trigger a trade war. Previous tariffs during his first term prompted retaliation from other nations, targeting U.S. goods such as soybeans, whiskey, and automobiles. Analysts from the Peterson Institute for International Economics project significant cost increases for consumers if the new tariffs are implemented.
Despite internal debates within his administration, Trump remains committed to his campaign pledges. His willingness to adjust specifics indicates that the ultimate tariff policy may depend on evolving political and economic conditions. The exact impact of these measures, however, will hinge on how they are executed and whether they achieve their intended objectives.