When President Trump reneged on his promise to immediately impose new tariffs on his first day in office, economic managers and others who support international trade breathed a sigh of relief.
This relief was short-lived. On Monday evening, just hours after his inauguration speech, Mr. Trump said he planned to impose a 25 percent tariff on products from Canada and Mexico starting February 1, claiming that the countries were sending “large numbers of people and fentanyl would allow them to come to the United States.
On Tuesday evening, Mr. Trump said he would also impose an additional 10 percent tariff on Chinese products by the same date and accused China of sending fentanyl to Mexico and Canada, which then ended up in the United States.
Mr. Trump's threats only last 10 days before significant levies could take effect on the United States' three biggest trading partners, a move that could roil U.S. diplomatic ties and global supply chains.
Mexico, China and Canada account for more than a third of the goods and services imported into or purchased from the United States, supporting tens of millions of American jobs. Together, the countries bought more than $1 trillion in U.S. exports and provided nearly $1.5 trillion in goods and services to the United States in 2023, the most recent year for which government data is available .
While the United States has long used tariffs as punishment for unfair trade practices, Trump's first effort aims at a very different goal: tightening America's borders against immigrants and illegal drugs.
Those targets could mean that Mr. Trump's tariffs are less likely to go into effect or more likely to be repealed if they do take effect. This contrasts with other tariffs his team is planning that are aimed at reordering global supply chains and increasing government revenue.
It is also not clear which products the tariffs would apply to if they were imposed. A person familiar with the Trump administration's deliberations said it had considered tariffs on all imports from those countries, as well as tariffs on certain goods such as cars, steel and aluminum. The Trump administration did not immediately respond to a request for comment.
Stock markets largely ignored Mr Trump's tariff declarations and closed at near record highs yesterday.
Officials in Canada, Mexico and China are working to draw up lists of American products on which they could impose their own tariffs in retaliation if Mr. Trump decides to move forward.
But they are also responding to Mr. Trump in ways that suggest his threats of tariffs are working. The Canadian and Mexican governments in particular rushed to get ahead of the tariffs, sending officials to reassure the Trump team that they were trying to address its concerns.
The Mexican government has expanded its immigration deterrence efforts and increased seizures of illegal opioids. Canada has also committed new resources to policing its border, including deploying two new Blackhawk helicopters and purchasing 60 U.S.-made drones to monitor the border. Canada's immigration agency said illegal migrant border crossings have fallen 86 percent in the past two months, a side effect of tightening visa requirements. Illegal border crossings at the U.S.-Mexico border are near a four-year low.
It is unclear whether the Chinese government has taken new steps in response to Mr. Trump's recent tariff threats, but Mr. Trump said he discussed fentanyl as well as trade and other issues in a phone call last Friday with Chinese leader Xi Jinping .
The Chinese government committed to the US during both the Trump and Biden administrations to curb the export of fentanyl and its precursors. During Mr. Trump's first term, China introduced a ban on fentanyl and began coordinating efforts with the United States to catch drug traffickers. And in 2023, Mr. Xi and former President Joseph R. Biden Jr. agreed to a series of bilateral talks on drugs after meeting in Woodside, California.
Asked whether the United States and China had discussed the prospect of 10 percent tariffs on Chinese products, Mao Ning, a Chinese Foreign Ministry spokeswoman, said at a news conference in Beijing on Wednesday that China was “ready” to cooperate to communicate with the United States States should expand cooperation and manage the differences between the two countries.
“We always believe that there is no winner in a tariff or trade war,” she added. “We will always resolutely protect our national interests.”
In a Senate confirmation hearing last week, Treasury Secretary nominee Scott Bessent gave three main reasons the Trump administration might impose tariffs. Some tariffs could be aimed at combating unfair trade practices, while others could bring in revenue for the federal budget.
He added that as an experienced negotiator, Mr. Trump had “added a third application of tariffs.” Tariffs could be used for negotiations, including for Mexico on the fentanyl crisis, he said.
Douglas A. Irwin, an economic historian at Dartmouth College, said there have been some cases in history when U.S. leaders have tied trade measures to non-trade goals – like President Nixon making the return of Okinawa to Japan conditional on the imposition of export restrictions in textiles – but that Mr. Trump was “very open-hearted and transactional in his approach.” “It’s pretty unique and unusual,” he said.
Business owners expressed concerns about the prospect of new tariffs. Economists have estimated that a 25 percent tariff on goods from Canada and Mexico could shrink the size of the U.S. economy by hundreds of billions of dollars and also potentially override the trade agreement between the three countries that binds its members to it renounce moves.
The economies of Mexico and Canada in particular are closely intertwined with the US economy. Supply chains for various goods snake back and forth across North American borders, moving between fields, factories and stores in each country as they are transformed from raw materials into finished products.
A single car and its parts can cross the US-Canada border multiple times during assembly. A pair of blue jeans could be made from cotton, fabric, and buttons from the United States, but sewn in a factory in Mexico. Farmers in the United States send corn and soybeans south of the border to be used in packaged foods and animal feed; Mexican farms send American grocery stores cheap avocados, mangoes and tomatoes even in the dead of winter.
If a 25 percent tariff were imposed every time one of these products crosses the U.S. border, it could significantly increase the cost of the goods Americans buy and even force U.S. manufacturers to go out of business.
“The supply chain challenges we have faced in recent years will appear mild compared to what is on the horizon,” said Jonathan Colehower, managing director of global supply chain management at UST, a consulting firm.
The tariff threats are reminiscent of incidents during Mr. Trump's first term. In the spring of 2019, Mr. Trump promised to close the U.S. border with Mexico and then threatened tariffs of 5 percent on all Mexican products, rising to as much as 25 percent if the country failed to stem the flow of migrants and asylum seekers . Mr. Trump ultimately decided not to follow through on those threats.
Matina Stevis-Gridneff and Siyi Zhao contributed research and reporting.