- Donald Trump will impose 25% tariffs on Mexico and Canada starting Tuesday to curb illegal immigration and fentanyl trafficking, while doubling China's tariff to 20%.
- Financial markets reacted negatively, with major indexes dropping significantly and Goldman Sachs estimating every 5% tariff increase could decrease S&P 500 earnings by 1%-2%.
- Trump announced additional agricultural tariffs starting April 2 amid predictions of record-high agricultural trade deficits, with mixed opinions on whether domestic farmers will benefit.
Starting Tuesday, the U.S. will impose 25% tariffs on Mexico and Canada. President Donald Trump has said the tariffs are a response to illegal immigration and fentanyl trafficking, despite recent moves from both countries to address his allegations.
Both Mexico and Canada were able to delay Trump’s initial tariffs by a month after implementing changes at the border, but Trump’s extensions appear to have run out.
“Tomorrow, tariffs — 25% on Canada and 25% on Mexico,” Trump said during a White House press conference on Monday.
“And that’ll start. … What they have to do is build their car plants, frankly, and other things in the United States, in which case they have no tariffs,” the president said, per Reuters.
The White House released a fact sheet on Feb. 1 outlining their justifications for levying the tariffs.
However, while the original document assigns a 10% tariff to China, Trump signed an executive order Monday, raising the number to 20%. The president justified the increase over China failing to take the appropriate measures to reduce fentanyl trafficking to the U.S.
The stock market takes a hit
Trump’s most recent tariff announcement has rattled more than just Canada and Mexico.
The Dow was down nearly 650 points, around 1.5%, by the end of the day on Monday. Similarly, the S&P 500 was down 1.76%, roughly 100 points, and Nasdaq was down over 2.5%.
The Wall Street Journal reported that while the U.S. dollar strengthened against the peso and Canadian dollar, the dollar weakened against the euro and the pound.
Bitcoin also dropped around 8% Monday, and European stocks outperformed the U.S.
These drops are most likely sell-off driven by concerns on economic implications of Trump’s impending tariffs.
David Kostin, the chief U.S. equity strategist at Goldman Sachs Research, estimated that for every 5% tariff increase, S&P 500 earnings will decrease around 102%.
However, other financial experts are hopeful about Trump’s tariffs and their impact on the economy. National Economic Council director Kevin Hassett expressed his belief that Trump’s tariffs are more about leverage than about creating set-in-stone policy, per Semafor.
Tariffs as an incentive to bring businesses to the U.S.
White House press secretary Karoline Leavitt posted a Reuters report to X, Monday morning, saying Trump’s tariffs against Mexico have already caused one car company to move production from Mexico to Indiana.
Currently, Honda sends over three-quarters of the cars it produces in Mexico to the United States, Reuters reported. The report added that roughly 40% of the Hondas sold in the U.S. were originally imported from either Mexico or Canada.
While Honda’s move seems to be an example of Trump’s tariffs working as he hopes, ON Semiconductor CEO Hassane El-Khoury told Semafor in late February that the recent unpredictability of tariffs has made it difficult to do business.
It’s “a difficult time to invest,” Khoury said. “The chaos that is reigning right now is causing everyone to sit on their hands.”
Agricultural tariffs and a flurry of others
In addition to announcing Mexico and Canada’s tariff implementation, Trump added to the tariff frenzy in a Truth Social post, Monday.
“To the Great Farmers of the United States: Get ready to start making a lot of agricultural product to be sold INSIDE of the United States,” he wrote. “Tariffs will go on external product on April 2nd. Have fun!”
These new tariffs come shortly after the USDA predicted 2025 would bring the country’s highest ever agricultural trade deficit — $49 billion.
Northwest Horticultural Council President Mark Powers spoke at the USDA’s Ag Outlook Forum in late February on how things are looking bleak for the agricultural sector this year, per Brownfield Ag News.
“We’re in a nongrowth mode because our growers are under such duress and financial constraints,” Powers said. He added that many are hoping to “just basically stay in business.”
Powers believes federal restrictions from the world market are the biggest impediment U.S. agriculture faces.
Trump’s agricultural tariffs could potentially benefit American farmers by decreasing the dependency on export markets. However, some have already expressed worries on what this will do to food prices as a whole.
One X user mimicked Trump’s original post, writing, “To the Great Tax Payers of the United States: Get ready for our tax dollars to start subsidizing ... our farmers because other countries are about to slap tariffs on all our agricultural products.”
Trump has also hinted he will implement tariffs on pharmaceuticals, semiconductors, copper, lumber, cars and other imports.