President Trump Hits Canada, China, Mexico With Tariffs, But Then Hits Pause On Some
On Saturday, Feb. 1, President Donald Trump announced new tariffs on all products from Canada, China, and Mexico, including industrial metals products. The purpose of the tariffs, the White House said, was to address the “extraordinary threat posed by illegal aliens and drugs, including deadly fentanyl” coming into the United States. Read the White House’s order at this link.
By Monday, Feb. 3, however, the president had reached a deal with the Canadian and Mexican governments to pause imposition of the penalties for 30 days. (The tariffs had been set to go into place at 12:01 a.m. ET on Tuesday Feb. 4. That date will still be the implementation timeframe for penalties on Chinese products.)
As a reminder, while the Metals Service Center Institute (MSCI) supports actions to address unfair trade practices by countries that continually circumvent international rules, as a trade association representing firms throughout North America, our organization and its leadership have continually argued shipments from Canada and Mexico should be exempt from these penalties. Please find our 2017 testimony articulating this position at this link.
Even though the penalties on Canadian and Mexican goods are off the table, it is important to understand the full scope of the president’s order from Saturday since these penalties may move forward in March.
On Saturday, President Trump said that until the cross-border immigration and drug crisis is “alleviated,” the U.S. government would impose a 25 percent tariff on imports from Canada and Mexico and a 10 percent tariff on imports from China. Those penalties would have been on top of existing tariffs, including the Section 232 penalties that are now in place for steel and aluminum exports from China. Under the White House’s order, energy resources imported from Canada would have been subject to a lower tariff, 10 percent, than tariffs for all other products.
Together, Canada, China, and Mexico collectively account for $1.6 trillion in annual U.S. imports and exports. Crude oil is the top product the United States imports from Canada, accounting for 60 percent of U.S. oil imports. Canada and Mexico are the United States top trading partners for vehicles and car parts, accounting for nearly half of U.S. motor vehicle imports in 2023.
The question going into President Trump’s announcement — the president had been threatening these actions since before his 2024 election — was how the Canadian, Chinese, and Mexican governments would respond. While the full scope of their reaction is not yet known, the Chinese government said Saturday it plans to file a case against the United States at the World Trade Organization. A spokesperson for the Chines government also indicated the country would put into place “corresponding countermeasures.” (The spokesperson did not offer any specifics regarding that threat.)
The Canadian government acted more quickly with penalties of its own. As Bloomberg explained, Prime Minister Justin Trudeau said President Trump’s move left his government with no choice but to respond forcefully. As such, the Canadian government, as of Tuesday, Feb. 4, Canada was going to place 25 percent counter-tariffs on C$155 billion worth of U.S.-made products. The first phase of tariffs would have impacted about C$30 billion in goods from U.S. exporters, including orange juice, peanut butter, wine, coffee, motorcycles, and cosmetics. A much larger list of U.S.-manufactured products — one that includes steel, aluminum, automobiles, trucks, boats, and other items — would have been subject to tariffs some time this month. (Read the Government of Canada’s statement at this link. Find a list of products that were to have been subject to the Feb. 4 tariffs at this link.)
But, again, like the United States’ proposed penalties on Canadian goods, Prime Minister Trudeau’s countermeasures are off the table for now.
It is also worth noting that President Trump’s Feb. 1 order included a clause promising the United States would pursue even higher tariffs if the Canadian government retaliated. The language in that section was not clear what measures the U.S. government would take next, however. Indeed, the clause merely stated, “Should Canada retaliate against the United States in response to this action through import duties on United States exports to Canada or similar measures, the president may increase or expand in scope the duties imposed under this order to ensure the efficacy of this action.”
Stay tuned to Connecting the Dots as this story develops and, again, please take time to review our 2017 testimony articulating MSCI’s position on steel and aluminum tariffs on North American trading partners, which is available at this link.