PHILADELPHIA (AP/ KYW Newsradio) — President Donald Trump’s long-threatened tariffs against Canada and Mexico went into effect today, putting global markets on edge and setting up costly retaliations by the United States’ North American allies.
Imports from Canada and Mexico will now be taxed at 25%, with Canadian energy products subject to 10% import duties.
Today on Kansas City's Morning News, ABC's Karen Travers at the White House joined Wink & Amy to talk about the impact, along with President Trump's address to Congress tonight. You can listen to the entire interview here:
The 10% tariff that Trump placed on Chinese imports in February was doubled to 20%, and Beijing retaliated Tuesday with tariffs of up to 15% on a wide array of U.S. farm exports. It also expanded the number of U.S. companies subject to export controls and other restrictions by about two dozen.
Canadian Prime Minister Justin Trudeau said his country would slap tariffs on more than $100 billion of American goods over the course of 21 days. Mexico President Claudia Sheinbaum said Mexico will respond with its own retaliatory tariffs on U.S. goods.
The United States last year did nearly $2.2 trillion in the trade of goods — exports plus imports — with the countries the president is targeting: $840 billion with Mexico, $762 billion with Canada and $582 billion with China.
Trump has declared an economic emergency in order to justify the duties, marking the most aggressive use of tariffs by the United States since the 1930s. He claims that the sanctions are designed to reduce the flow of undocumented migrants and illicit drugs across the U.S. border.
Energy imported from Canada, including oil, natural gas and electricity, will be taxed at a lower 10% rate — a concession to households in the U.S. Northeast and Midwest that depend on Canadian energy.
The U.S. president’s moves raised fears of higher inflation and the prospect of a trade war even as he promised the American public that taxes on imports are the easiest path to national prosperity. He has shown a willingness to buck the warnings of mainstream economists and put his own public approval on the line, believing that tariffs can fix what ails the country.
“It’s a very powerful weapon that politicians haven’t used because they were either dishonest, stupid or paid off in some other form,” Trump said Monday at the White House. “And now we’re using them.”
CBS News business analyst Jill Schlesinger expects prices for key items to go up at some point, as companies could pass along some or all of the extra cost to consumers. The first place it could be felt is at the grocery store.
“Mexico supplies more than 60% of vegetable imports — half of all fruit and nut imports. So yes, we make the joke about it, but avocado prices are definitely going up,” she said. “Maple syrup from Canada is probably going to rise. Beer from Mexico could rise and lumber costs, which are really important for new houses, those lumber costs are also going to rise.”
Fuel costs will be something to watch, as petroleum products are the top import from Canada — $108 billion worth, according to 2023 census data.
Moody’s Analytics chief economist Mark Zandi expects bigger ticket items will cost more in the coming months.
“Everything from vehicles to appliances to consumer electronics,” he said. “All those things will take time to filter through. But I suspect by Memorial Day, we will all feel the effects of the higher prices on all these different products.”
One study from the Anderson Economic Group in Michigan projects that some new cars could cost anywhere from $6,000 to $12,000 more, which could lead to a cut in production and layoffs.
“As long as these tariffs are in place, we should expect that there will be higher prices and slower growth,” Schlesinger said.
These tariffs won’t be helping efforts to cool inflation either, she added.
“As long as these tariffs stay in place for a while, we are seeing economists project that inflation could rise by a half a percentage point in an annualized basis,” she said, meaning anywhere from 3.5% to 4%.
Here’s a closer look at the impacted industries:
A ‘grenade’ lobbed into auto production
For decades, auto companies have built supply chains that cross the borders of the United States, Mexico and Canada. More than one in five of the cars and light trucks sold in the United States were built in Canada or Mexico, according to S&P Global Mobility. Last year, the United States imported $79 billion worth of cars and light trucks from Mexico — far more than any other country — and $31 billion from Canada. Another $81 billion in auto parts came from Mexico and $19 billion from Canada. The engines in Ford F-series pickups and the iconic Mustang sports coupe, for instance, come from Canada.
“You have engines and car seats and other things that cross the border multiple times before going into a finished vehicle,’’ said Scott Lincicome, a trade analyst at the libertarian Cato Institute. “You have American parts going to Mexico to be put into vehicles that are then shipped back to the United States.
“You throw 25% tariffs into all that, and it’s just a grenade.’’
China is also a major supplier of auto parts to the U.S. — $18 billion worth last year.
S&P Global Mobility reckons that “importers are likely to pass most, if not all, of this (cost) increase to consumers.’’ TD Economics notes that average U.S. car prices could rise by around $3,000 – this at a time when the average new car already goes for nearly $49,000 and the average used car for $25,000, according to Kelley Blue Book.
Higher prices at the pump
Canada is by far America’s biggest foreign supplier of crude oil. In 2024, Canada shipped the U.S. $98 billion worth of crude, well ahead of No. 2 Mexico at $12 billion.
For many U.S. refineries, there’s not much choice. Canada produces the “type of crude oil that American refineries are geared to process,’’ Lincicome said. “It’s a heavier crude. All the fracking and all the oil and gas we make here in the United States — or most of it — is a lighter crude that a lot of American refineries don’t process, particularly in the Midwest.’’
Of the tariffs on Canadian oil imports, Lincicome said, “how the heck does that shake out? My guess is that it shakes out just through higher gas prices, particularly in the Midwest.’’
Computers, clothes and toys
Tariffs on China could impact a wide variety of consumer goods that Americans depend on. Cellphones, computers and other electronic devices were among the top imports from China last year, according to Commerce Department data.
The U.S. also imported more than $32 billion in “toys, games and sporting goods” from China last year, data shows.
And, Americans import billions of dollars a year in clothing from China. That includes more than $7.9 billion in footwear last year, according to Commerce Department data.
Trouble in Margaritaville
Tariffs could raise the price for those raising a glass of tequila or Canadian whisky.
In 2023, the U.S. imported $4.6 billion worth of tequila and $108 million worth of mezcal from Mexico, according to the Distilled Spirits Council of the United States, a trade group. The U.S. imported $537 million worth of Canadian spirits, including $202.5 million worth of whisky.
Canada and Mexico were also the second- and third-largest importers of U.S. spirits in 2023, behind the European Union, the council said.
The council said the U.S. is already facing a potentially devastating 50% tariff on American whiskey by the European Union, which is set to begin in March. Imposing tariffs on Mexico and Canada could pile even more retaliatory action on the industry.
Tariffs would hit Mexican avocados
For American consumers still exasperated by high grocery prices, a trade war with Canada, Mexico and China could be painful. In 2024, the U.S. bought more than $49 billion in agricultural products from Mexico — including 47% of imported vegetables and 40% of fruits. Farm imports from Canada came to $41 billion. A 25% tariff could push prices up.
“Grocery stores operate on really tiny margins,’’ Lincicome said. “They can’t eat the tariffs ... especially when you talk about things like avocados that basically all of them — 90% — come from Mexico. You’re talking about guacamole tariffs.”
U.S. farmers are nervous, too, that Canada and Mexico will retaliate by slapping tariffs on American products such as soybeans and corn. That’s what happened in the first Trump administration. China and other targets of Trump tariffs hit back by targeting the president’s supporters in rural America. Exports of soybeans and other farm products dropped, so Trump spent billions of U.S. taxpayer money to reimburse farmers for lost sales.