How the US-Canada-Mexico tariffs will work—and what products are targeted
Summary
- Uncertainty surrounds the trade war touched off by Trump’s tariffs. But some of the basics are taking shape.
The Trump administration said Saturday it will levy 25% import tariffs on goods from Mexico and Canada, with Canadian energy products facing a 10% tariff. The announcement also includes an extra 10% tariff on imports from China. The tariffs will take effect on Tuesday. Already, Canada has announced retaliatory tariffs, and Mexico has pledged to do the same.
The machinery of tariffs is complicated. How they will play out isn’t certain, largely because the White House appears to be partly using them as a negotiating tool. But here are answers to a few fundamental questions about how they work, and their immediate impact to American businesses and consumers:
Who pays the tariffs?
The firms importing the goods, many of which are American individuals and businesses, will pay for the tariffs.
Who bears the ultimate burden of the tariffs however isn’t so straightforward. An American importer can pass along the cost of tariffs to American businesses or consumers by raising its prices. Alternatively, a foreign exporter might ultimately shoulder the burden if it cuts prices to avoid losing sales.
If the tariffs prompt U.S. companies to turn to other countries for imports, those levies can be avoided, of course. Though in those instances, Canadian, Mexican and Chinese workers might lose jobs. Under that scenario, Americans would also likely pay higher prices, with more goods coming from alternative suppliers that face higher costs. If production shifts to the U.S., Americans would likely pay higher prices as well, though some of that would likely go toward the wages and profits of other Americans.
What sort of goods will be affected?
Prices of a host of items are likely to rise, from cars to gas, smartphones, and fresh vegetables.
Since the U.S. buys billions of dollars of lumber from Canada, the cost of home construction might go up. The U.S. also relies to a significant degree on Canada to supply its frozen french fries.
The cost of electronics and toys imported from China are expected to go up. And from Mexico, grocery goods from tequila, to avocados and tomatoes are also likely to get higher price tags, potentially affecting millions of American households.
Which firms will feel the impact?
During Trump’s first term, American firms had an opportunity to apply for exemptions from tariffs. And many were granted. For instance, Apple won tariff exemptions for some of its China-made products.
Whether there will be a process to apply for exemptions this time around is unclear. A senior administration official told reporters on Saturday that there will be no exemptions to the tariffs. Instead, the duties will be in place until the White House is satisfied that the trading partners have scrubbed out the illicit fentanyl moving into the U.S.
How do these tariffs compare with those from Trump’s first term?
They’re bigger.
Start with China. Tariffs imposed by the U.S. in 2018 and 2019—during Trump’s first term—covered nearly two-third of all imports from China, or roughly $370 billion in annual goods. Tariffs this time apply to all Chinese exports to the U.S., which totaled around $401.4 billion in 2024, according to Census Bureau data.
This round of tariffs also targets Mexico and Canada with sweeping, 25% tariffs on most products. In 2024, the U.S. imported $466.6 billion worth of goods from Mexico and $377.2 billion worth of goods from Canada.
During Trump’s first term, his administration imposed tariffs on steel and aluminum from Canada and Mexico for about one year. Tariffs he announced on all imports from Mexico were averted after a new free-trade agreement was hashed out by the U.S., Mexico and Canada (USMCA).
This round of action by Trump also targets the “de minimis" loophole which allows shipments valued under $800 to enter the U.S. duty-free. Use of the trade provision has ballooned in recent years, partly through the explosive growth of Chinese e-commerce merchants. The U.S. will suspend this loophole for Canada, because of concerns that packages from there aren’t being properly inspected under the exemption.
What should we expect moving forward?
Retaliation, and a lot of uncertainty.
Canadian Prime Minister Justin Trudeau said his country would retaliate with 25% tariffs on more than $105 billion of U.S. goods, about a third of the $322.2 billion in goods that the U.S. exported to Canada in 2024, according to U.S. census data. The first wave—hitting $20 billion worth of goods, including alcohol, coffee, clothing and shoes—will take effect Tuesday. The rest is slated to take effect in three weeks.
Mexican President Claudia Sheinbaum has said Mexico would retaliate with tariffs and nontariff measures. China’s Commerce Ministry has said it will take unspecified countermeasures.
The responses will likely affect hundreds of billions worth of U.S. exports to the three countries. In 2024, the U.S. exported $309.4 billion worth of goods to Mexico, and $131 billion to China.
This explanatory article may be updated periodically.
Write to Chao Deng at chao.deng@wsj.com