President-elect Donald Trump is vowing to impose tariffs of 25 per cent on all goods coming from Canada and Mexico on his first day back in the White House, until the U.S.’s two neighbouring countries stop migrants and fentanyl from entering the nation.
Mr. Trump made the announcement on Monday evening on his Truth Social platform, firing an opening salvo in the global trade war he has long promised in his second term as U.S. president.
“On January 20th, as one of my many first executive orders, I will sign all necessary documents to charge Mexico and Canada a 25 per cent tariff on all products coming into the United States, and its ridiculous open borders. This tariff will remain in effect until such time as drugs, in particular fentanyl, and all illegal aliens stop this invasion of our country!” the president-elect wrote.
For Canada, which sends more than 77 per cent of its exports to the U.S., the tariffs would represent an economic blow and threaten a recession, with the oil and auto industries particularly affected. For U.S. consumers, who would pay the cost of the tariffs, they would mean punishing price increases.
For Mr. Trump, the tariffs combine two of his foundational political issues: building protectionist trade barriers around the U.S. economy and hardening the country’s borders against migrants.
Here are five things we know so far.
How many migrants, and how much fentanyl, is actually going from Canada to the U.S.?
According to U.S. Customs and Border Protection, border patrol officers had 23,721 “encounters” with people along the Canadian border last year – this refers to the number of times they stopped people trying to cross the border without going through an official crossing.
That number was a sharp increase from 10,021 the year before and 2,238 the year before that. But it is small over all: by comparison, border patrol had 1,530,523 such encounters at the Mexican border last year, meaning the total number of unauthorized crossings of the U.S. border from Canada was less than 2 per cent of the number coming from Mexico.
Similarly, U.S. customs agents seized 43 pounds of fentanyl at the Canadian border last year. This represented less than 0.2 per cent of the total 21,900 pounds intercepted across the U.S. More than 96 per cent of that total, 21,100 pounds, was seized at the Mexican border.
Canada has already taken some action to stop migrants attempting to use the country to enter the U.S. Earlier this year, after CBP data showed about half of border guards’ encounters along the Canadian border were with Mexican nationals, Canada imposed a visa requirement on Mexicans entering the country.
What would the effect of 25-per-cent tariffs be?
In his tariff announcement, Mr. Trump vowed that Canada and Mexico would “pay a very big price.” What he didn’t mention is that U.S. consumers would also be hit with extra costs.
Trevor Tombe, an economist at the University of Calgary, estimates that if Mr. Trump imposes his 25-per-cent tariff, the Canadian economy would go into recession. According to Prof. Tombe’s economic modelling, the tariff would reduce Canada’s real GDP by 2.6 per cent annually, translating to a hit of $2,000 per person, he wrote Monday night on X.
The effects would not be evenly distributed. A report by the Canadian Chamber of Commerce this fall, based on Mr. Trump’s previous promise of 10-per-cent tariffs, estimated that the levies would cut oil, gas and mining exports to the U.S. by more than 40 per cent, while the auto sector would see a decline of up to 20 per cent.
While Mr. Trump likes to claim that tariffs are paid by foreign countries, they are actually paid for by people importing the tariffed products into the U.S., with the cost often passed on to consumers.
An estimate by the Peterson Institute for International Economics this past summer found that, if Mr. Trump imposed tariffs of 20 per cent on all goods entering the country, the average American family would face added costs of US$2,600 a year.
Among other things, gasoline would become more expensive, as would cars. Canada is by far the U.S.’s largest supplier of petroleum, shipping more than 1.6 billion barrels last year, while auto manufacturing chains stretch across all three countries, with vehicle components typically crossing borders between Canada, the U.S. and Mexico multiple times for a single finished vehicle.
Why does this all seem so familiar?
Mr. Trump has a history of threatening to use tariffs to put pressure on other countries to agree to his demands. In his previous presidential term, he got then-Mexican president Andrés Manuel López Obrador to implement a series of migration-related policies by threatening tariffs on all Mexican-made products.
Mr. Trump also thinks tariffs are good economic policy. During his previous term, he imposed a raft of tariffs on China, which remain in place. He also hit most countries with tariffs on steel and aluminum, including Canada and Mexico. In his election campaign this year, he promised to put 10- to 20-per-cent tariffs on all goods entering the U.S. and 60 per cent on goods from China.
The president-elect has also vowed to renegotiate the U.S.-Mexico-Canada Agreement when it comes up for review in 2026. The three countries signed the deal in 2018 to replace NAFTA at Mr. Trump’s behest. While USMCA and NAFTA are mostly identical, the former did add some protectionist measures, mostly intended to shore up the U.S. auto industry at the expense of Mexico.
Mr. Trump has recently expressed dissatisfaction with USMCA, particularly that it has not led to as many new auto industry jobs in the U.S. as he had hoped. He has also accused Mexico of being a backdoor for Chinese goods to enter the U.S. without paying American tariffs.
In any renegotiation, the U.S. would likely also demand more access to Canada’s dairy market, which currently has high tariffs under the supply-management system, and that Ottawa scrap its digital services tax.
How would Trump’s tariffs work? Wouldn’t USMCA prevent him from doing this?
The USMCA means there are no tariffs on the vast majority of trade between Canada, the U.S. and Mexico. Canada and Mexico could theoretically launch a trade case against the U.S. under the deal if Mr. Trump goes forward with his tariffs. But trade disputes tend to take years to make their way through the system.
A more immediate route that Canada and Mexico could try would be imposing retaliatory tariffs on the U.S. This is what Ottawa did in 2018 in response to Mr. Trump’s steel and aluminum tariffs. In that case, Canada picked strategic products to tariff – such as Kentucky bourbon because it was produced in the home state of Republican senate leader Mitch McConnell – in a bid to ramp up the political pressure. The U.S. ultimately backed down and removed the tariffs after about a year.
Another possibility is a court challenge on the U.S. side with the goal of getting an injunction against the tariffs taking effect. One U.S. industry source said that Mr. Trump’s plan would almost certainly be challenged by American businesses in court. The source said at least one business group is already exploring its options. The Globe agreed to keep the source confidential because they were not authorized to speak publicly on the issue.
At issue may also be which U.S. law Mr. Trump tries to use to impose the tariffs. He has previously threatened to use the International Emergency Economic Powers Act, which has never previously been used to impose tariffs, making it ripe for a court challenge. He could also use Section 301 of the Trade Act of 1974, which he used to impose tariffs on China, but that legislation requires a months-long process before tariffs can be put in place.
What is Canada doing?
Since early this year, Canadian officials have been fanning out across the U.S. trying to build alliances with American politicians and business leaders. This Team Canada push has been led by Kirsten Hillman, Canada’s ambassador to the U.S., and François-Philippe Champagne and Mary Ng, the industry and trade ministers, respectively. The hope is that these U.S. contacts, in states and industries that rely heavily on trade with Canada, could be used to put pressure on a future Trump administration not to hit Ottawa with tariffs.
More discreetly, some Canadian officials have spent months trying to build ties to Mr. Trump’s inner circle. After Mr. Trump’s election victory earlier this month, the Trudeau government unveiled a new committee focused on U.S.-Canada relations and led by Deputy Prime Minister Chrystia Freeland, who was the point person on USMCA negotiations in 2018.
It all resembles the strategy the Trudeau government employed during Mr. Trump’s first term, when Canada managed to dissuade Mr. Trump from enacting his strongest protectionist promises. Among other things, Mr. Trump threatened to unilaterally withdraw the U.S. from NAFTA and demanded new rules that would have ensured a specific percentage of every vehicle made in North America was manufactured in the U.S.
On Monday evening, about two hours after Mr. Trump issued his latest tariff promise, Prime Minister Justin Trudeau spoke with him by phone, one Canadian official with knowledge of the call said.
The pair discussed trade and border security, and Mr. Trudeau pointed out to Mr. Trump how small the number of migrants coming from Canada to the U.S. is compared to the figure on the Mexican border, the source said.
