During President Trump’s second term in 2025, the U.S. government doubled down on its protectionist trade agenda, wielding tariffs as a central tool to achieve “reciprocal trade,” protect homegrown manufacturing, and tackle illegal immigration along with fentanyl smuggling. The Trump administration contended that Canada and Mexico were not meeting U.S. standards regarding cross-border illicit immigration and drug trafficking. As a result, the administration imposed steep tariffs on imports from both countries, aiming to compel them to enforce stricter border controls and security measures while incentivizing the reshoring of production to the United States.
Tariff rates and implementation
1. Main tariff rates
- Canadian and Mexican goods: From March 4, 2025, the United States officially imposed a 25% tariff on imports from Canada and Mexico. However, tariffs on Canadian energy products (such as oil and natural gas) are lower, at 10%. This difference reflects the United States’ tough stance on curbing border smuggling and illegal immigration and the importance of certain goods to the US economy and energy security.
- USMCA trade agreement: Meanwhile, goods that comply with the US-Mexico-Canada Agreement (USMCA) provisions will continue to enjoy zero tariff treatment. This means that some products exported to the United States from Canada and Mexico will be exempt from tariffs, provided that they meet the agreement’s requirements, such as “rules of origin”. Currently, the US government emphasizes that only non-compliant goods will face a 25% tariff, while compliant goods will not be affected.
2. Tariff implementation time
The Trump administration initially planned to implement the tariffs on February 4, 2025. After negotiations between the two sides, the implementation date was postponed by 30 days and set for March 4. The United States stated that since border security, fentanyl containment, and immigration issues have not yet achieved the desired results, there is no room for continued negotiations, and the tariffs “must proceed as planned.” Canadian Prime Minister Justin Trudeau and Mexican President Andres Manuel Lopez Obrador have tried to negotiate a de-escalation of the situation but ultimately failed to change the Trump administration’s plans entirely.
The main reasons for increasing tariffs
1. Combating drug and immigration problems
Trump has repeatedly stated publicly that illegal immigration and cross-border fentanyl smuggling are serious problems currently facing the United States. He believes that Canada and Mexico have failed to effectively control the situation, resulting in rising pressure on US border security. Therefore, a high tariff of 25% is imposed to force these two countries to take more stringent security and border control measures.
2. Promoting domestic manufacturing and trade balance
The Trump administration believes that the United States currently has a considerable trade deficit, especially in trade with Canada and Mexico, and has been in a state of deficit for a long time. Tariff measures are seen as a means to weaken foreign competitiveness and encourage production to return to the United States, thereby reshaping the supply chain structure in North America and globally.
Mexico’s failure to control the situation effectively has increased pressure on US border security. Therefore, 25% high tariffs are imposed to force these two countries to take more stringent security and border measures.
2. Promote domestic manufacturing and trade balance
The Trump administration believes the United States has a considerable trade deficit, especially with Canada and Mexico. Tariffs are seen as a means of weakening foreign competition and encouraging production to return to the United States, thereby reshaping the supply chain structure in North America and worldwide.
International and domestic reactions
1. Canada and Mexico’s response measures
- Canada: The Canadian government strongly opposes the United States’ move. Prime Minister Trudeau condemned the tariff measure as violating the provisions of the USMCA and damaging the close economic and trade relations established between the United States and Canada over a long period. Canada has announced plans to impose retaliatory tariffs on many US imports, targeting nearly US$100 billion of US goods. In addition, Canada has taken enhanced measures in terms of border security and combating fentanyl smuggling, including the appointment of a “fentanyl czar” to coordinate related work.
- Mexico: Mexican President Enrique Peña Nieto has also expressed strong dissatisfaction and promised to announce detailed countermeasures after the US tariffs are enacted. According to reports, Mexico has deployed 10,000 members of the National Guard to the border with the United States to strengthen border law enforcement and combat transnational crime. Mexico hopes to alleviate the pressure of US accusations and tariffs by improving border management and stepping up internal law enforcement.
2. Reactions in the US domestic and international markets
- Economic market: The global market has fluctuated following the implementation of the tariffs. The US stock market fell after the tariff news was released, and some analysts are concerned that the tariffs will push up US consumer prices, disrupt supply chains, and negatively impact industries such as automobiles. At the same time, against the backdrop of the escalating US-China trade war, Trump has also imposed additional tariffs on Chinese products, exacerbating global trade tensions.
- Political signals and prospects for negotiations: The Trump administration’s move was an economic measure and a tool of political pressure to force Canada and Mexico to make further concessions on immigration and drug issues. Although the two sides had previously negotiated tariffs, they could not reach a satisfactory result for the US, which resulted in the tariffs taking effect as planned.
Summary
Overall, the tariffs imposed by the United States on Canada and Mexico in 2025 officially took effect on March 4 and have become an essential part of Trump’s more aggressive trade policy during his second term. The US government insists that the 25% tariffs are necessary to force Canada and Mexico to strengthen border enforcement and combat illegal immigration and transnational drug smuggling, as well as an essential lever to adjust the US trade deficit and promote domestic manufacturing. However, this measure has not only severely impacted the economic and trade relations between the United States and Canada and the United States and Mexico but has also further strained the global trade environment and put some cost pressure on US consumers.
In the future, whether the parties can reach substantive improvements through negotiations under the pressure of tariffs will remain a key concern for the US, Canada, Mexico, and the global market. The US government’s temporary maintenance of zero tariffs on exemptions for USMCA-compliant goods shows a certain degree of hope for continued cooperation to ease conflicts. However, the Trump administration’s tariff policy has shifted towards protectionist measures with a broader scope and higher tax rates.
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