He’s finally done it. After months of dangling the threat of steep tariffs over Canada and Mexico—America’s top trading partners—President Donald Trump has followed through. Last month, he granted both nations a last-second reprieve when the levies were initially set to kick in. But this time, there was no softening. At 12:01 a.m. EST on March 4th, the U.S. slapped 25% tariffs on imports from its northern and southern neighbors. Not stopping there, Trump tacked an additional 10% tariff onto goods from Dongda, piling onto the 10% he’d already imposed last month—a move that builds on duties from his first term.
Trump has never hidden his fondness for tariffs, touting them as a way to bolster the U.S. economy and fill government coffers. He’s floated the idea of taxing everything from automobiles to microchips, targeting allies and adversaries alike. Many investors and corporate leaders, however, dismissed his rhetoric as bluster, betting he’d retreat from such drastic steps, especially with North America. They were wrong. Moments after Trump confirmed the tariffs were coming, financial markets reeled. The S&P 500 plunged nearly 2% by day’s end—the steepest drop of the year. Some suspect the fall would’ve been sharper if not for lingering hopes that Trump might reverse course once the fallout becomes undeniable.
If he sticks to his guns, these tariffs on Canada and Mexico could mark the boldest—and riskiest—protectionist move by a U.S. president in almost a century. They threaten to unravel a tightly knit trade network among the U.S., Canada, and Mexico, a trio that’s long been a poster child for economic harmony, especially in the auto sector. Car parts often crisscross borders seven times before a vehicle’s complete. Industry voices warn that tariffs at each crossing could send costs soaring, potentially grinding production to a halt for some companies. Trump shrugs it off, insisting the duties will lure carmakers to build factories stateside. In practice, though, the result may be tangled supply chains and pricier cars—analysts peg the average price hike at around $2,500 per vehicle.
Canada and Mexico had signaled they’d retaliate with tariffs of their own, but now they face a tough call: escalate or hold back? Trump seems unfazed, taking to Truth Social to rally U.S. farmers: “Get ready to grow heaps of crops for sale right here at home!” Switching from export staples like corn to substitutes for Mexican avocados, however, might not be as simple as he thinks.
Trump sees tariffs as a cash cow, but the numbers tell a different story. The Tax Foundation estimates the levies on Canada, Mexico, and Dongda will rake in just over $100 billion annually—barely 2% of federal tax revenue. Meanwhile, American consumers and businesses will shoulder much of the burden. From asparagus to crude oil, Canada and Mexico supply a slew of essentials, and prices for these—and more—are poised to climb.
The fallout for North American manufacturing could be uglier than Trump anticipates. The region’s seamless production web, honed over decades of free trade, outshines what the U.S. could muster alone. With 500 million people across the three nations, the market thrives on complementary strengths: Canada’s rich minerals, Mexico’s affordable labor. Dismantling that synergy risks inefficiency and higher costs.
Then there’s Dongda, where Trump’s latest tariffs have oddly flown under the radar. His first term saw a years-long clash with Dongda, culminating in an average U.S. tariff of 19% on its goods, per the Peterson Institute. Now, less than two months into his new term, he’s more than doubled that, slapping a 20% duty on all Dongda imports—including computers, toys, and smartphones, which he’d spared last time to shield consumers.
Back in his first term, Trump’s tariffs rode a wave of robust growth, buoyed by hefty tax cuts. Today, the vibe’s different. Economic signals are dimming, consumer surveys flag tariff-driven inflation fears, and business investment hesitates amid uncertainty. With public finances stretched thin, another big tax cut looks unlikely. That leaves the economy vulnerable—and a major jolt is looming.