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(Bloomberg) -- President Donald Trump said he planned to enact previously threatened tariffs of as much as 25% on Mexico and Canada by Feb. 1, reiterating his contention that America’s two immediate neighbors are allowing the flow of undocumented migrants and drugs into the country.
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“We’re thinking in terms of 25% on Mexico and Canada, because they’re allowing vast numbers of people,” into the country, Trump said in response to questions from reporters, as he sat behind the Oval Office’s Resolute Desk on Monday night. “I think we’ll do it February 1.”
Trump’s plans for tariffs on two nations vital for US energy and auto imports threatens to set off a trade war among the signatories of the US-Mexico-Canada Agreement, the successor to Nafta negotiated at Trump’s insistence during his first term. The pact governed the flow of $1.8 trillion in goods and services trade, based on 2022 data.
Both Canada and Mexico have said they’d retaliate against American goods if Trump slaps tariffs on them. The USMCA is up for review in 2026.
“Canada’s a very bad abuser,” Trump said, complaining about the current of fentanyl and migrants across the northern US border.
The dollar jumped against most major currencies following Trump’s remarks. Bloomberg’s dollar gauge rose as much as 0.7%, the most since Dec. 18, as investors sought haven assets. The Canadian dollar and Mexican peso fell more than 1% against the greenback on the news.
US React: Trump Day One - Tariffs Delayed, Not Denied
Tariffs of the magnitude that Trump is proposing would spell “disaster” for the US auto industry and Detroit’s carmakers, each of which import a significant number of vehicles from Canada and Mexico, Bernstein analysts said in a November research note. Stellantis NV imports about 40% of the vehicles they sell in the US, while General Motors Co. imports roughly 30% and Ford Motor Co. 25%, they said at the time.
The additional levies would hit about $97 billion worth of auto parts and 4 million finished vehicles that come into the US from those countries, and could boost average new-car prices by about $3,000, according to Wolfe Research.
Trump also indicated he was still considering a universal tariff on all foreign imports to the US, but said he was “not ready for that yet.”