President Donald Trump is moving ahead with sweeping tariffs on imports from Canada, Mexico and China, dismissing last-minute appeals from those governments. Trump declared there is “no room left” for a deal to avert the levies, which are set to take effect just after midnight, raising the specter of an escalating trade war. The tariffs – 25% on all goods from Canada and Mexico (with 10% on Canadian energy) – mark a sharp break with decades of free trade in North America and have rattled financial markets. U.S. stock indexes fell sharply on the news, amid warnings that the tariffs, covering over $900 billion in annual cross-border trade, will disrupt tightly knit supply chains.
Trump: “No room” to negotiate on tariffs
Trump announced the tariffs will hit at 12:01 a.m. ET on Tuesday and insisted neither Canada nor Mexico could do anything to stop them. “They’re going to have to have a tariff,” Trump told reporters, suggesting Canada and Mexico should relocate factories to the U.S. if they want to avoid future penalties. He tied the trade measures to his demand that both neighbors curb the flow of fentanyl and illegal drugs into the U.S., saying efforts so far have been insufficient. Trump ruled out extending talks, stating flatly that there was “no room left” for a last-minute compromise to avert the tariffs. The White House also warned it would impose “reciprocal tariffs” on any country that retaliates against U.S. products, effective April 2.
Administration officials acknowledged the move is unprecedented among North American allies. U.S. Commerce Secretary Howard Lutnick noted Canada and Mexico had made progress on border security, but not enough to satisfy Washington’s concerns about opioid trafficking. Peter Navarro, Trump’s trade adviser, said the President is “unwavering” and downplayed the economic fallout, arguing any inflation from tariffs will be minimal and that the policy will ultimately boost U.S. factories and wages. CEOs and economists, however, warn the tariffs pose a “serious setback” to the integrated continental economy, which has flourished under free trade pacts.
Canada: “Ready to respond” to U.S. tariffs
Officials in Ottawa reacted with dismay and resolve. Canadian Foreign Minister Mélanie Joly said her government “will be dealing with” the tariffs and stands “ready to respond,” lamenting the “unpredictability and chaos that comes out of the Oval Office.” Prime Minister Justin Trudeau’s administration has condemned Trump’s tariff decision as unjustified. Canadian leaders point out the country has tightened border security and worked to address U.S. drug concerns, and they view the U.S. move as a breach of the spirit of the USMCA trade agreement.
Canada is preparing a sweeping retaliation. Immediately after Trump’s tariff order was first signed on 1 February earlier this year, Ottawa unveiled plans for CAD $155?billion in counter-tariffs on U.S. goods. The Canadian measures are set to roll out in two stages: an initial wave of 25% duties on about $30?billion worth of U.S. exports – covering a wide range of products from agricultural goods and foodstuffs to steel, paper, and apparel – followed by a second wave hitting more sensitive sectors. Passenger vehicles, aerospace products, beef and pork are among the items on Canada’s list for potential later retaliation, signaling pain for U.S. auto and meat industries if the dispute deepens. Canadian officials have also hinted at non-tariff actions and support from provincial governments to pressure the U.S. “This is a violation of the trust in our trade relationship, and we will respond in equal measure,” a Canadian government source told reporters, noting Canada’s counter-tariffs will take effect as long as the U.S. duties remain in place.
Mexico: Calm front, “Plan B” in motion
In Mexico City, President Claudia Sheinbaum urged calm even as she put retaliatory plans into motion. Sheinbaum said her government prefers dialogue but has been “forced to respond in kind” to defend Mexico’s interests. Over the past month, Mexico undertook diplomatic efforts to avoid the tariffs – from deploying 10,000 National Guard troops to the U.S. border to stepping up drug seizures and even extraditing a notorious drug lord to the U.S. last week. Those moves won a one-month tariff postponement in early February, but with that grace period expired, Trump was not swayed to delay further.
Hours before Trump’s final decision, Sheinbaum said Mexico was “calm as it awaited” the U.S. announcement, but ready to react immediately if needed. “We have a plan B, C, D,” she noted, without revealing specifics. After Trump confirmed the tariffs, Sheinbaum took to social media to order retaliatory tariffs and other countermeasures, instructing Economy Minister Marcelo Ebrard to activate the contingency plan. Ebrard blasted the U.S. tariffs as a “flagrant violation” of the U.S.-Mexico-Canada Agreement and vowed that “Plan B is underway. We will win!”
Mexico’s retaliation is expected to target politically sensitive U.S. exports while trying to minimize damage at home. According to officials and sources, Mexico has drawn up a list of U.S. goods that could face 5–20% tariffs, focusing on agricultural and industrial products. Likely targets include American pork, dairy products (such as cheese), fresh produce, and processed foods, as well as some steel and aluminum exports. Notably, Mexico’s initial reprisals would exempt U.S. auto exports, reflecting the deeply interwoven auto supply chain and Mexico’s reliance on U.S. car manufacturing. Mexican policymakers are also weighing non-tariff measures to pressure the U.S., though they must tread carefully; Mexico imports large volumes of U.S. natural gas, gasoline and corn, so any move to curtail those could backfire on its own economy. Economists estimate the tariffs could shave up to 4% off Mexico’s GDP this year if they persist, raising the stakes for a quick resolution.
China: Denouncing “blackmail” and eyeing U.S. farms
Beijing has reacted angrily to Trump’s separate tariff hike tied to fentanyl trafficking. Alongside the North American duties, Trump is doubling a tariff on Chinese goods – from 10% to 20% on roughly $439?billion in imports – citing China’s alleged failure to stop illegal fentanyl shipments. Chinese officials slammed the move. The Foreign Ministry accused Washington of using the fentanyl issue as “tariff pressure and blackmail,” warning that the U.S. tactics will “backfire” and harm cooperation on drug control. Beijing insists it has made “remarkable” efforts to curb fentanyl and blasted Trump’s linkage of trade with law enforcement as coercive.
Although Trump’s fentanyl-related China tariffs were initially imposed last month, prompting immediate retaliation from Beijing, the latest escalation has China preparing a fresh round of countermeasures. State media and officials signal that China’s response will be sweeping. The state-run Global Times reported that Beijing is “studying and formulating” steps to answer Trump’s additional 10% tariff, with plans likely to include both new tariffs and non-tariff measures. Crucially, American agriculture is in Beijing’s crosshairs. An anonymous Chinese source told the Global Times that U.S. farm and food products will “most likely be listed” among the targets. China is the largest buyer of U.S. agricultural exports, and in past disputes it has zeroed in on commodities like soybeans, corn, meat and grains to inflict economic pain on U.S. farming regions.
Beyond tariffs, China is expected to retaliate through regulatory and commercial actions against U.S. companies. Beijing has already signaled U.S. tech and consumer companies could face scrutiny. It might also consider limiting exports of critical materials, such as rare earth elements, that U.S. industries need.
For now, the tariffs are set to proceed, and all eyes are on the responses from Ottawa, Mexico City, and Beijing. There is still hope in some quarters that negotiations could resume to defuse the conflict, but with each side digging in, retaliation appears imminent.
