WASHINGTON, D.C – US President Donald Trump is set to impose fresh tariffs on key trading partners—Canada, Mexico, and China—raising concerns over supply chain disruptions and inflation.
The move, expected to be announced Saturday, will see a 25% tariff on imports from Canada and Mexico, and a 10% tariff on Chinese goods.
Trump framed the tariffs as a response to illegal immigration and the fentanyl crisis, blaming Canada and Mexico for failing to curb the flow of the drug into the US.
He also accused China of playing a role in fentanyl production.
Beyond security concerns, Trump has long railed against the US trade deficit with all three countries.
However, the sweeping tariffs come with significant risks.
Higher import costs could push up consumer prices and strain businesses, a potential economic hurdle for Trump, who won re-election in November on a promise to ease the cost of living.
Economic Fallout and Inflation Risks
Economists warn that the tariffs could fuel inflation just as the Federal Reserve has been working to keep prices stable.
Gregory Daco, chief economist at EY, projected that the tariffs could push inflation up by 0.7 percentage points in the first quarter before gradually easing.
“Rising trade policy uncertainty will heighten financial market volatility and strain the private sector, despite the administration’s pro-business rhetoric,” Daco cautioned.
Trump’s supporters, however, argue that tax cuts and deregulation efforts could offset the economic drag from tariffs, boosting overall growth.
Trade Partners Ready to Retaliate
Trump’s tariff plans have drawn criticism from Democratic lawmakers.
Senate Minority Leader Chuck Schumer warned that the move would “further drive up costs for American consumers” and urged the administration to focus on “competitors who rig the game, like China, rather than attacking our allies.”
Canada and Mexico, both key suppliers of US agricultural and industrial goods, have signaled they are prepared to respond.
Canadian Prime Minister Justin Trudeau said Ottawa would take “a purposeful, forceful, but reasonable, immediate response” if the tariffs proceed.
Mexican President Claudia Sheinbaum struck a cautious tone, saying her government was ready with contingency plans but would approach the situation “with a cool head.”
The auto industry is among the sectors bracing for a major impact.
In 2024, 22% of all light vehicles sold in the US were imported from Canada and Mexico, according to S&P Global Mobility.
With automakers relying on a regional supply chain for components, tariffs could raise production costs and drive up car prices.
Oil Tariffs in Flux
The energy sector could also feel the heat, with potential tariffs on Canadian and Mexican crude oil imports.
Analysts at the Atlantic Council warn that such a move could disrupt US energy markets, particularly in the Midwest.
Trump has hinted at a softer stance on oil, saying he is “probably going to reduce the tariff a little bit on that,” suggesting a potential 10% rate instead of a higher levy.
Canada supplies nearly 60% of US crude imports, and refining operations in the US heavily depend on its heavy oil.
A tariff could push up costs for US refiners, potentially leading to higher gasoline prices.
