Trump prepares radical shift in Mexico, Canada relationships with new tariffs

President Trump is on the cusp of upending North American trade, threatening to strike a radical blow to relationships with America's top economic partners.

Trump is expected to announce Saturday steep new tariffs on goods from Canada and Mexico, after pledging for months to impose import taxes on two close U.S. allies.

The president has left several questions about his plans unanswered, such as how high the tariffs might be, when they would be implemented, under which law they would be issued and which goods might be exempted.

Trump’s most aggressive proposal, however, would hit all Canadian and Mexican products with 25 percent import taxes. Experts say doing so would spur near-immediate increases in food and fuel prices, while prompting damaging retaliation from two countries deeply integrated into the U.S. economy.

“That would be a massive deal. These are America's two largest trading partners. We depend on imports from both of those countries, and your first-order impact is higher prices for American consumers and for companies,” said Edward Fishman, a senior research scholar and adjunct professor at Columbia University.

“And I think that's why you see a lot of people, including folks who supported President Trump, voice a lot of concerns,” added Fishman, author of the forthcoming book “Chokepoints: American Power in the Age of Economic Warfare.”

Trump himself has brushed off the potential costs of tariffs, which are taxes paid by the U.S. individuals and companies who ordered and imported targeted products. The president has frequently claimed that foreign countries pay for tariffs, and that the taxes themselves are necessary to fight other economic harms.

“Mexico and Canada have never been good to us on trade,” he said Thursday, confirming his plans to impose tariffs. “They’ve treated us very unfairly on trade, and we will be able to make that up very quickly because we don’t need the products that they have.”

Trump has griped for years that the U.S. imports more goods from Canada and Mexico than they do from the States, a dynamic reflected in trade deficits with each nation. The U.S. trade deficit in Canada was roughly $45 billion and $170 billion with Mexico in 2024, according to federal data.

Trump and his protectionist allies have long argued that the U.S. should rebalance trade with Canada and Mexico as a matter of basic fairness. 

“Our farmers, our ranchers and our fishermen are the best in the world, and they are treated poorly. Canada, as we spoke about, treats our dairy farmers horribly. That's got to end,” said Howard Lutnick, Trump’s nominee to serve as Commerce secretary, during a Wednesday confirmation before the Senate Commerce Committee.

“If Canada is going to rely on America for its economic growth, how about you treat our farmers, our ranchers and our fishermen with respect?”

During his first term, Trump led a renegotiation of NAFTA that earned praised from Democrats and union advocates for boosting U.S. products through various labor and environmental stipulations.

But Trump has expanded the aims of his tariffs — and his ire with Canada and Mexico — during his second term. The president has alleged that both Canada and Mexico are refusing to take necessary steps to stop the flow of migrants and lethal drugs such as fentanyl into the U.S.

Lutnick also claimed Wednesday that Mexican cartels were operating drug labs in Canada, allowing traffickers to avoid beefed up security at the southern border.

“If we are your biggest trading partner, show us the respect. Shut your border and end fentanyl coming into this country. So it is not a tariff, per se. It is an action of domestic policy.”

Canadian and Mexican officials have made clear they are ready to respond with steep tariffs of their own on U.S. goods, a prime area of concern among senators from states dependent on agricultural exports.

The U.S. also imports billions of dollars in oil from Canada, which could become drastically more expensive with import taxes.

The blowback could leave Americans paying more for produce from Mexico and oil from Canada, while also hurting U.S. farmers eager to make inroads in Canada’s dairy market and other key industries.

The tariffs could also derail the U.S. auto industry, which is deeply intertwined with factories and assembly plants in Mexico and Canada. Autos and auto parts can cross the U.S. northern and southern borders more than a dozen times before a car or truck is ready for sale, incurring tariffs along the way.

“I'm concerned about the high cost of vehicles. Many families can't afford them now, and if tariffs are put in place that deal with that seamless trade that goes on with Canada, that in the short run, definitely have an impact on prices and make cars even more unaffordable,” said Sen. Gary Peters (D-Mich.) to Lutnick.

Fishman added that Canada and Mexico could take even more drastic steps to hurt the U.S. if Trump keeps steep tariffs on their goods, including curtailing oil production or halting certain imports or exports entirely.

He added that Trump’s failure to identify specific steps or milestones Mexico and Canada must take to free themselves of tariffs could undermine their effectiveness at achieving his goals.

“There’s not a great track record of coercive economic measures, be it tariffs or sanctions, achieving that kind of a function without explicitly laying out what you’re trying to achieve, and I haven’t heard clear goals,” he said.

“They can be used as a negotiating tool, or they can be used to address structural problems like deficits or something else, but it’s hard to do both at the same time."