President Donald Trump moved forward Saturday with his plans for tariffs on Canada, Mexico and China, ending a guessing game about how aggressively he would move to penalize America’s three largest trading partners.
The tariffs — as Trump has promised since after his election win — will be 25% duties on Canada and Mexico and 10% on China over issues of fentanyl and illegal migration.
The duties on all three countries will be fully in force by Tuesday, February 4th, according to the order signed by Trump Saturday afternoon in Florida.
Trump is declaring a national economic emergency under the 1977 International Emergency Economic Powers Act (IEEPA), which will allow him to impose the duties.
President Donald Trump before boarding Air Force One on Friday as he headed to Mar-a-Lago for the weekend. (JIM WATSON/AFP via Getty Images) ·JIM WATSON via Getty Images
Canada, Mexico, and China are expected to quickly announce retaliatory measures across a range of goods.
“Canada’s ready with a forceful and immediate response,” Prime Minister Justin Trudeau posted on Friday. Canada says it has a plan in place and has floated a range of ideas like retaliatory tariffs on goods from Florida orange juice to Tennessee whiskey.
Trump’s executive order also include a retaliation clause which could allow the US tariffs to rise further in response to any retaliatory measures.
Indeed, the economic effects of the duties could be significant on all economies involved, especially if they are kept in place for an extended duration.
Yale’s Budget Lab has offered an estimate of the adjusted duties, suggesting that these new tariffs could translate in a decline of about $1,250 in annual purchasing power for a middle class family.
EY chief economist Greg Daco has taken a macroeconomic look and estimated that US GDP would contract by 1.5% in 2025 and 2.1% in 2026 if the tariffs kick in.
On the other side of the ledger, the nonpartisan Committee for a Responsible Federal Budget estimates that the duties are likely to raise up to $1.5 trillion over the coming decade if they are made permanent.
Canadian Prime Minister Justin Trudeau speaks at a press conference during a visit to Poland earlier this week. (Attila Husejnow/SOPA Images/LightRocket via Getty Images) ·SOPA Images via Getty Images
Economists and markets are set to work overtime in the days ahead to try and get more precision. The stock market fell on Friday at the tariff debate reached a crescendo in a sign of anxiety among investors as they awaited final confirmation of this weekend’s moves.
The White House has meanwhile tried to downplay possible economic effects while disputing any link between inflation and price increases.
White House Press Secretary Karoline Leavitt on Friday avoided a question about whether the administration would reverse tariffs if they do increase prices.
“That’s a hypothetical question,” she said and then accused the media of looking at the issue “in a microscope rather than looking at the whole of government economic approach that this president is taking.”
Other voices on Saturday offered praise for the move. A Trump ally on Capitol Hill, House Agriculture committee chair Glenn Thompson, offered that “President Trump’s tariff policy has been an effective tool in leveling the global playing field and ensuring fair trade for American producers.”
But other Trump’s allies were critical of the move.
“Tariffs are simply taxes,” wrote Sen. Rand Paul, a vocal Trump advocate on other fronts, on Saturday. “Taxing trade will mean less trade and higher prices,” he added.
Trump imposed those duties using a presidential authority granted in a 1977 law that allows them to be in place quickly. It’s one of the few authorities that experts say will grant him the authority to have the duties in place as quickly as he hopes.
The use of the International Emergency Economic Powers Act does give Trump considerable latitude to move quickly and on tariffs but could open him to legal challenges.
The law grants the president wide authorities including the possible implementation of tariffs within hours once an emergency is invoked but only asks for consultation with Congress “in every possible instance.”
The White House previously confirmed that tariffs using IEEPA authority were drafted to implement duties on another front — against Colombia — but those duties are now being held in reserve.
Overall, Saturday The move is a restarting of trade wars that marked Trump 1.0 with the president now promising to go much further.
Trump’s actions between 2017 and 2020 were often wide-ranging — covering well over half of Chinese imports for example — but often focused on specific sectors like steel and aluminum.
This time around, Trump has acted first on large umbrella tariffs.
It was a sizable list of industries from semiconductors to steels to copper to pharmaceuticals. He also outlined a plan to “absolutely” impose tariffs on the European Union in the future.
“Eventually we are going to put tariffs on chips,” he added at one point. The semiconductor comments came after a meeting with Nvidia (NVDA) CEO Jensen Huang.
It was emblematic of Trump’s deep feelings on the issue as Trump has also repeatedly waved away concerns from colleagues and economists and business leaders saying Friday “tariffs don’t cause inflation, they cause success.”
Ben Werschkul is Washington correspondent for Yahoo Finance.
Every Friday, Yahoo Finance’sRick Newman and Ben Werschkul bring you a unique look at how U.S. policy and government affects your bottom line on Capitol Gains. Watch or listen to Capitol Gains on Apple Podcasts, Spotify, or wherever you find your favorite podcasts.
