Donald Trump, who will be president in January, has a big plan to put tariffs on America’s three biggest trade partners—Canada, Mexico, and China—on his first day in office.
All goods coming from Canada and Mexico would be subject to a 25% tariff, and goods coming from China would be subject to an extra 10% duty.
A lot of people are talking about what these brave steps mean for the economy, politics, and the law.
The Tariff Plan: Objectives and Justifications
Trump has said that these tariffs will help solve a number of problems, including drug trafficking, stopping illegal immigration, and lowering the United States’ trade imbalance.
- Canada and Mexico: The president-elect says that we need to act right away because of the large number of drugs and illegal immigrants coming into the U.S. through these countries. In a post on Truth Social, Trump said that “crime and drugs are at levels never seen before.” He used this to explain why the 25% tax was necessary to stop these problems.
- China: The extra 10% tariff on Chinese goods is meant to stop people from bringing fentanyl into the US illegally. Trump has said that China is a big cause of the opioid crisis, and he hopes that the tariffs will put pressure on the Chinese government to stop the flow of illegal drugs.
Trump’s words sound a lot like the tariffs he put in place during his first term, but experts and leaders from the countries that are being targeted warn of big problems that could happen.
Economic Ramifications
American consumers and businesses could see prices go up because of the proposed tariffs. They would also hurt trade ties and the United States-Mexico-Canada Agreement (USMCA).
Impact on Prices
Tariffs are like taxes on imports, which makes the prices of things higher for everyone.
Canada, for example, sends a lot of crude oil, natural gas, and agricultural goods to the U.S., while Mexico sends a lot of car parts. In the same way, China sells electronics and other consumer things.
The Peterson Institute for International Economics says that broad tariffs like Trump’s could add an extra $2,600 a year to the costs that U.S. families have to pay.
Also, these kinds of actions could make prices go up, which goes against Trump’s campaign claim to lower prices for Americans.
Potential Violations of Trade Agreements
People from the U.S., Canada, and Mexico can trade freely with each other under the USMCA, which was signed in 2020 to replace NAFTA.
Trump’s planned tariffs seem to go against the terms of this agreement, which could lead to lawsuits and other actions in response.
There is a chance that Trump will try to renegotiate the USMCA, but that won’t happen until 2026. This timeline makes me wonder if his plans are possible and if they are legal.
Trade Relationships at Risk
Experts say that tariffs could hurt the U.S.’s economic relationships with its biggest trade partners, giving those countries a reason to turn their attention to other markets.
- Canada and Mexico: Trade between the U.S. and Mexico reached $72.5 billion in September 2024, while trade with Canada totaled $63.8 billion. Mexican President Claudia Sheinbaum and Canadian officials have voiced strong opposition to Trump’s plans, citing risks of inflation, job losses, and weakened economic cooperation.
- China: In response to previous tariffs, China imposed retaliatory duties on American exports like soybeans and corn, devastating U.S. farmers. A similar scenario could unfold, further straining relations between the two nations.
A professor at Texas A&M University named Raymond Robertson warned that Trump’s plan to raise tariffs could go wrong. “Trading partners could try to get closer to Europe and other places, which would make them less reliant on the U.S. and cause prices to go up for Americans,” he said.
Political and Social Backlash
Domestic Criticism
Economists and political leaders in the U.S. don’t like Trump’s plans for tariffs because they go against what he said in his campaign about economic growth and cost.
A lot of people think that tariffs cause inflation because businesses often charge customers more when prices go up.
Big stores like Walmart and manufacturers like AutoZone have said that prices will go up if broad taxes are put in place.
People in the middle and lower income groups in the U.S. could have even more trouble with their finances because of this. Living costs are already very high.
International Reactions
Leaders in Canada and Mexico have expressed strong opposition to Trump’s tariff threats.
- Canada: Ontario Premier Doug Ford called the proposed 25% tariff “devastating” for workers and businesses on both sides of the border. He urged Prime Minister Justin Trudeau to convene an emergency meeting to develop a unified response. Trudeau, who recently spoke with Trump, emphasized the importance of “effective connections” between the two nations.
- Mexico: President Claudia Sheinbaum criticized Trump’s approach, advocating for cooperation rather than confrontation. She highlighted Mexico’s success in reducing migrant crossings by 76% between December 2023 and August 2024. Sheinbaum warned that a tariff-driven trade war could harm both nations, urging Trump to pursue dialogue instead.
China’s embassy responded ominously, stating, “No one will win a trade war.”
Legal and Logistical Hurdles
While Trump can impose tariffs without congressional approval under national security provisions, such actions are likely to face legal challenges. Critics argue that his broad interpretation of “national emergency” to justify tariffs on major trading partners could be contested in court.
Additionally, transitioning manufacturing from overseas to the U.S.—a goal Trump frequently touts—is a complex process that cannot be achieved overnight. Establishing domestic factories takes years, and many companies remain reliant on global supply chains.
Lessons from History
Trump’s tariff proposals echo his trade policies during his first term, which saw mixed results.
- 2018-2020 Tariffs: Trump’s initial tariffs on Chinese goods led to retaliatory measures that hurt American farmers, prompting a $10 billion government bailout. While some manufacturing jobs returned to the U.S., others were lost due to higher input costs.
- USMCA: Trump’s renegotiation of NAFTA into the USMCA was hailed as a major achievement, promoting economic integration across North America. However, the current tariff threats risk undoing this progress.
Looking Ahead
As Trump gets ready to take office, his plan to raise tariffs is a big risk that could have big effects.
The suggested steps might help in negotiations, but we can’t ignore the political and economic risks they bring.
People in the U.S. are worried about prices going up, and businesses are worried about trade ties and supply chains. The taxes could lead to retaliation from Canada, Mexico, and China, which would change the way trade works around the world.
Tariffs show how hard it is to find a balance between national security, economic growth, and working together with other countries.
The world is watching what Trump does on January 20. It will set the tone for his administration’s trade policies and how they affect the world economy.