Trump’s Proposed Tariffs on Canada and Mexico: What Now? 

James Wang

Guest Essay

January 19, 2025

January 20th, 2025.

That’s the date Donald Trump will be inaugurated as the 47th president of the United States. It is also the day he’s planning to prove why he’s often dubbed the “Tariff Man” by imposing a whopping 25% tariff on all Canadian and Mexican imports to the United States. Following Trump’s lofty promises of “Making America Great Again” and his previous commitment to trade wars with other countries, people are fearing if he is starting yet another trade war with Canada.

On November 25th, at 6:35 p.m., only a couple weeks after the presidential election results came out, Donald Trump sent a post on X explaining what he will do once he gets inaugurated as president. The main focus of the post was that he would ensure any imports from Canada and Mexico would be charged with 25% tariffs. He cited a growing problem of “open borders, drugs (in particular, fentanyl) and immigrants” to justify his tariffs, mentioning that Canada and Mexico had “the absolute right and power to easily solve this issue.”

There are multiple theories suggesting how he would impose these tariffs. One of the popular ones is that Trump will use his negotiation strategies when he meets Justin Trudeau. This was evident in Trump’s speeches during the final days of December. Stephen Moore, who worked closely with Trump as an economic advisor, noted that he often tried to gain leverage over others by using threats and taunting them. In Trump’s recent speech in Palm Beach, Florida on January 7th, he relentlessly taunted Canada, calling for the country to join as the “51st state”, that the US already “protects Canada”, and called Justin Trudeau the “51st governor”.

If Trump follows through with his promises and threats, there will be severe economic fallout for every country affected by the tariffs, especially with Canada and Mexico. To start, the United States’ GDP will take a 1.6% hit, or about 456 billion USD. For reference, that is just above Mastercard’s value of 433 billion USD, and the average American will lose $1 300 annually. Furthermore, many imported goods will substantially increase in cost. In 41 US states, Canada or Mexico is the main trade partner, highlighting the country’s importance when it comes to US exports.

As for Canada’s economy, the GDP would be hit even harder, shrinking by 2.6%, or about 78 billion CAD. Canada’s economy, which is already underperforming, will likely be pushed into a recession, with 500,000 jobs at risk. This is because Canada is reliant on the United States for exports. Out of the $722 billion in exports, three quarters goes to the States. The economic sectors that would experience the most damage would be agriculture, as roughly 19% of all American imports from Canada is related to agriculture, including livestock, grains, oilseeds, and products made from them. Mexico will also be hit hard, as the Mexican economy is struggling from rising inflation, imbalanced wages, and slowing economic growth. An additional tariff would decimate smaller companies exporting goods to the US, as they, along with Canadian and American companies, would have to adapt to these new tariffs by reducing the price of their products to stay competitive.

This tariff, on top of making multiple countries’ economies suffer, also violates the United States-Mexico-Canada Agreement (USMCA) which Trump signed back in 2018. This is because the agreement allowed for free trade between the three countries duty-free until 2036. Furthermore, these tariffs may inspire Canada, which is ready to impose counter-tariffs, to put their plans in effect. All of these tariffs will ultimately end with higher inflation, at the average civilian’s expense.

If put into action, Trump’s tariffs will undoubtedly leave a significant impact on the US, Canadian, and Mexican economies. However, only the four years ahead of us will tell whether these effects will help Trump make his promise of lower inflation and an improving economy.