When President Trump did not follow through with his promise to immediately impose new tariffs on his first day in office, business executives and others who support international trade breathed a sigh of relief.
That relief was short-lived. On Monday night, just hours after his inauguration speech, Mr. Trump said he planned to put a 25 percent tariff on products from Canada and Mexico beginning on Feb. 1, claiming that the countries were allowing “mass numbers of people and fentanyl” to come to the United States.
On Tuesday evening, Mr. Trump said he would also put an additional 10 percent tariff on Chinese products by the same date, accusing China of sending fentanyl to Mexico and Canada, which was then crossing into the United States.
Mr. Trump’s threats leave just 10 days before significant levies could go into effect on the United States’ three largest trading partners, a move that could throw American diplomatic relationships and global supply chains into disarray.
Mexico, China and Canada account for more than a third of the goods and services that are imported to or bought from the United States, supporting tens of millions of American jobs. Together, the countries purchased more than $1 trillion of U.S. exports and provided nearly $1.5 trillion of goods and services to the United States in 2023, the last year government data is available.
While tariffs have long been used by the United States as punishment for unfair trading practices, Mr. Trump’s first use of them is aimed at an entirely different outcome: tightening American borders against immigrants and illegal drugs.
These goals could mean that Mr. Trump’s tariffs are less likely to go into effect, or that they are more likely to be removed if they do take effect. That is in contrast to other tariffs that his team is planning, which would seek to reorder global supply chains and raise revenue for the government.
It’s also not clear which products the tariffs would apply to if they are imposed. One person familiar with the Trump administration’s deliberations said they had been considering tariffs on all imports from those countries, as well as looking at tariffs on specific goods, like cars, steel and aluminum. The Trump administration did not immediately respond to a request for comment.
Stock markets have mostly shrugged off Mr. Trump’s tariff statements and closed yesterday at near record highs.
Officials in Canada, Mexico and China have been working to draw up lists of American products on which they could impose their own tariffs in retaliation, if Mr. Trump chooses 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 have been rushing to try to forestall tariffs, dispatching officials to reassure the Trump team that they are trying to address his concerns.
The Mexican government has been expanding migration deterrence efforts and increasing seizures of illicit opioids. Canada has also committed fresh resources to patrol its border, including deploying two new Blackhawk helicopters and buying 60 U.S.-made drones to surveil the border. Canada’s immigration department said that irregular migrant crossings are down by 86 percent in the last two months, a byproduct of a tightening of its visa rules. Illegal crossings at the U.S.-Mexico border are near a four-year low.
It’s unclear if the Chinese government has taken any new steps in response to Mr. Trump’s recent tariff threats, but Mr. Trump said that he had discussed fentanyl, as well as trade and other issues, in a phone call last Friday with Chinese leader Xi Jinping.
The Chinese government had made commitments to the United States, both during the Trump and Biden administrations, to stem exports of fentanyl and precursors. During Mr. Trump’s first term, China introduced a ban on fentanyl and began coordinating efforts with the United States to catch traffickers. And in 2023, Mr. Xi and former President Joseph R. Biden Jr. agreed to a series of bilateral talks on narcotics after they met in Woodside, Calif.
Asked if the United States and China had spoken about the prospect of 10 percent tariffs on Chinese products, Mao Ning, a spokeswoman for China’s Foreign Ministry, said at a news briefing in Beijing on Wednesday that China was “willing” to communicate with the United States to expand cooperation and manage the two countries’ differences.
“We always believe there is no winner in a tariff or trade war,” she added. “We will always firmly safeguard our national interests.”
In a Senate confirmation hearing last week, Scott Bessent, the nominee for Treasury Secretary, listed three main reasons that the Trump administration might deploy tariffs. Some tariffs could be aimed at remedying unfair trade practices, while others could raise revenue for the federal budget.
He added that Mr. Trump, as a skilled negotiator, had “added a third use 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 had been a few instances in history when U.S. leaders had linked trade actions to non-trade related goals — like President Nixon conditioning the return of Okinawa to Japan on its adopting export restraints in textiles — but that Mr. Trump was “very overt and transactional in his approach.” “It is pretty unique and unusual,” he said.
Business owners have expressed concern about the prospect of fresh 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, as well as potentially nullifying the trade agreement between the three countries, which requires its members to abstain from such moves.
The economies of Mexico and Canada in particular are closely integrated with the U.S. economy. Supply chains for various goods snake back and forth across North American borders, traveling between fields, factories and stores in each country as they are transformed from raw materials into finished products.
A single car and its parts may cross the U.S.-Canada border multiple times as it is assembled. A pair of bluejeans could be made with 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 incorporated into packaged food and animal feed; Mexican farms send American grocery stores cheap avocados, mangos and tomatoes, even in the dead of winter.
If a 25 percent tariff is added each time that one of those products crosses the U.S. border, it could significantly raise the cost of goods Americans buy and even force U.S. manufacturers to shutter operations.
“The supply chain challenges we’ve faced in recent years will appear mild compared to what’s on the horizon,” said Jonathan Colehower, managing director of global supply chain management at UST, a consulting company.
The tariff threats recall incidents during Mr. Trump’s first term. In the spring of 2019, Mr. Trump vowed to close the U.S. border with Mexico, then threatened 5 percent tariffs on all Mexican products, which would ratchet up to 25 percent unless the country stemmed the flow of migrants and asylum seekers. Mr. Trump ultimately decided not to go through with those threats.
Matina Stevis-Gridneff and Siyi Zhao contributed research and reporting.
