President Donald Trump moved forward Saturday with his plans for tariffs on Canada, Mexico and China, ending a guessing game about how aggressively he would move to penalize America's three largest trading partners.
The tariffs — as Trump has promised since after his election win — will be 25% duties on Canada and Mexico and 10% on China over issues of fentanyl and illegal migration.
The duties on all three countries will be fully in force by Tuesday, Feb. 4, according to the orders signed by Trump Saturday afternoon in Florida.
Trump said the drug and migration issues constituted a national emergency and moved forward on the duties using authority in the 1977 International Emergency Economic Powers Act (IEEPA).
"We need to protect Americans, and it is my duty as President to ensure the safety of all," Trump added in a Truth Social post.
President Donald Trump before boarding Air Force One on Friday as he headed to Mar-a-Lago for the weekend. (JIM WATSON/AFP via Getty Images) ·JIM WATSON via Getty Images
Canada, Mexico, and China are expected to quickly announce retaliatory measures across a range of goods.
"Canada’s ready with a forceful and immediate response," Prime Minister Justin Trudeau posted on Friday. Canada says it has a plan in place and has floated a range of ideas like retaliatory tariffs on goods from Florida orange juice to Tennessee whiskey.
Trump's executive order also include provisions that could allow tariffs to go even higher if the duties kick off a trade war.
A clause states that the US may respond to any retaliatory measures and "the President may increase or expand in scope the duties imposed under this order to ensure the efficacy of this action."
A range of likely economic effects
The economic effects of the duties are likely to be significant on all economies involved, especially if they are kept in place for an extended duration.
Yale’s Budget Lab has offered an estimate of the duties, suggesting that these new tariffs could translate in a decline of about $1,250 in annual purchasing power for a middle class family.
EY chief economist Greg Daco has taken a macroeconomic look and estimated that US GDP would contract by 1.5% in 2025 and 2.1% in 2026 if the tariffs stay in place.
On the other side of the ledger, the nonpartisan Committee for a Responsible Federal Budget estimates that the duties are likely to raise up to $1.5 trillion over the coming decade if they are made permanent.
Canadian Prime Minister Justin Trudeau speaks at a press conference during a visit to Poland earlier this week. (Attila Husejnow/SOPA Images/LightRocket via Getty Images) ·SOPA Images via Getty Images
Economists and markets are set to work overtime in the days ahead to try and get more precision. The stock market fell on Friday at the tariff debate reached a crescendo in a sign of anxiety among investors as they awaited final confirmation of this weekend’s moves.
The White House has meanwhile tried to downplay possible economic effects while disputing any link between inflation and price increases.
White House Press Secretary Karoline Leavitt on Friday avoided a question about whether the administration would reverse tariffs if they do increase prices.
"That's a hypothetical question," she said and then accused the media of looking at the issue "in a microscope rather than looking at the whole of government economic approach that this president is taking."
Other voices on Saturday offered praise for the move.
The top GOP tax official on Capitol Hill — House Ways and Means Committee Chairman Jason Smith — praised the move, saying Trump "is delivering on his promise to take bold action to protect our communities, secure our borders, and bring in additional revenues to the federal government."
But other Trump allies were critical.
"Tariffs are simply taxes," wrote Sen. Rand Paul, who is a vocal Trump advocate on other fronts. “Taxing trade will mean less trade and higher prices."
The Canadian Chamber of Commerce added its own blistering statement that called Trump’s move “profoundly disturbing” and added that it “will have immediate and direct consequences on Canadian and American livelihoods.”
Technical details of the duties
Trump imposed the new duties using a presidential authority granted in a 1977 law that allows them to be in place quickly. It’s one of the few authorities that experts say gives him the basis to have the duties in place as quickly as he hopes.
The law also only asks for consultation with Congress "in every possible instance."
Overall, Saturday's move is seen as a likely a restarting of trade wars that marked Trump 1.0 with the president now promising to go further in the weeks and months ahead.
Trump’s actions between 2017 and 2020 were often wide-ranging — covering well over half of Chinese imports, for example — but often focused on specific sectors like steel and aluminum.
This time around, Trump has acted first on large umbrella tariffs.
It was a sizable list of industries from semiconductors to steels to copper to pharmaceuticals. He also outlined a plan to "absolutely" impose tariffs on the European Union in the future.
"Eventually we are going to put tariffs on chips," he added at one point. The semiconductor comments came after a meeting with Nvidia (NVDA) CEO Jensen Huang.
It was emblematic of Trump's deep feelings on the issue even as Trump has repeatedly waved away concerns from colleagues and economists and business leaders, saying Friday “tariffs don’t cause inflation, they cause success.”
Ben Werschkul is Washington correspondent for Yahoo Finance.
Every Friday, Yahoo Finance'sRick Newman and Ben Werschkul bring you a unique look at how U.S. policy and government affects your bottom line on Capitol Gains. Watch or listen to Capitol Gains on Apple Podcasts, Spotify, or wherever you find your favorite podcasts.
