ATLANTA (AP) — President Donald Trump has taken executive action to impose new tariffs on imports from Canada, China and Mexico.
The move fulfills campaign promises but also sparked retaliatory moves that could signal an extended trade war with key trading partners and, in the case of Mexico and Canada, the closest U.S. neighbors and allies.
Unlike during the 2024 campaign, when Trump billed his economic agenda as a sure-fire way to reduce the cost of living for Americans, the president now is acknowledging what many economists have long forecasted: that the levies could yield higher prices and lower supplies across the market.
Here are some things to know about Trump’s actions, the counters from U.S. trading partners and what it means for American consumers:
The moves affect the three largest U.S. trading partners
Trump declared an economic emergency to place duties of 10% on all imports from China and 25% on imports from Mexico and Canada. Energy imported from Canada, including oil, natural gas and electricity, would be taxed at 10%. The tariffs on the United States’ three largest trading partners will go into effect on Tuesday.
The tariffs reach across the U.S. market. To name a few: oil and lumber from Canada; produce, clothing, liquor and auto parts from Mexico; plastics, textiles and computer chips from China.
Trump’s order contained no mechanism for granting exceptions to U.S. importers.
Underscoring the potential effects, Canada provides more than 4.3 million barrels of oil a day to the United States. The U.S. tends to consume about 20 million barrels a day, according to the U.S. Energy Information Administration. It has been producing domestically about 13.2 million barrels daily.
Trump says these levies are about immigration and drugs – downplaying economics
The president talked often as a candidate – and for decades before he entered politics – about U.S. trade deficits. He blasted international trade deals and bemoaned the steady flow of manufacturing jobs out of the U.S. to other countries. But he has framed his latest actions as leverage on immigration and drugs. Trump is blaming the three U.S. partners for not doing enough to stop the flow of fentanyl into U.S. markets. He blames Mexico and, to a lesser extent, Canada for an inflow of migrants across U.S. borders.
“It is my duty as president to ensure the safety of all,” Trump said on social media.
Canada, China and Mexico have responded
Trump’s order included a promise to escalate the tariffs if U.S. trading partners answered with their own. That threat did not prevent a swift response.
Mexican President Claudia Sheinbaum immediately ordered retaliatory tariffs and Canadian Prime Minister Justin Trudeau said he would put matching 25% tariffs on up to $155 billion in U.S. imports.
Trudeau urged Canadians to “choose Canadian products” when shopping, effectively urging a boycott of U.S. goods. Locally, multiple premiers of Canadian provinces said they would be removing American alcohol brands from government store shelves altogether.
As of Sunday afternoon, China had not imposed new tariffs on U.S. goods. But its Ministry of Foreign Affairs said the Beijing government will take “necessary countermeasures to defend its legitimate rights and interests.” The Ministry of Commerce said it would file a lawsuit with the World Trade Organization for the “wrongful practices of the U.S.”
Consumers will see the effects, even if businesses pay the actual tariffs
End-line consumers don’t pay tariffs directly. It’s usually whatever company – a foreign-based exporter or U.S-based importer – is transporting goods across the border. But that adds to the overall cost of getting goods to their final retail stop, and each player in that process is certain to increase their prices as a result.
Gregory Daco, chief economist at the tax and consulting firm EY, calculates the tariffs would increase inflation, which was running at a 2.9% annual rate in December, by 0.4 percentage points this year. Daco projects the U.S. economy, which grew 2.8% last year, would fall by 1.5% this year and 2.1% in 2026.
The Budget Lab at Yale University estimates Trump’s tariffs would cost the average American household $1,000 to $1,200 in annual purchasing power.
The effects reach even to companies and products billed as “made in the U.S.A.” Because sometimes that label means only that a product is assembled or otherwise finished in a U.S. facility but still includes raw materials, parts or packaging from elsewhere.
And as Trump himself said often during the campaign, energy costs – which become transportation costs in the supply chain – also drive consumer pricing. Given Canada’s share of the U.S. energy supply, gas prices could increase, especially in the Midwest, where so much Canadian crude oil is refined.
Trump has changed his tune on the consequences for consumers
Candidate Trump made sweeping, fantastical promises about the U.S. economy.
For example, he promised to lower grocery prices “immediately” and cut utility bills in half within a year of taking office. He repeatedly hammered the Biden administration as a failure because of inflation and invited the votes of Americans frustrated over a higher cost-of-living.
Vice President JD Vance, in a Fox News interview ahead of the tariff announcement, maintained that Trump’s policies would mean “more take-home pay” for U.S. workers.
Trump is now backing off such claims.
“Will there be some pain? Yes, maybe (and maybe not),” Trump wrote Sunday morning on social media. “But we will make America great again, and it will all be worth the price that must be paid.”
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Associated Press writers Josh Boak in Palm Beach, Florida, and Rob Gillies in Toronto contributed.
