US trade war intensifies: Trump’s tariffs expected to slash growth, push Mexico, Canada into recession

In a bold move to tackle illegal immigration and drug smuggling, US President Donald Trump has imposed a 25% tariff on imports from Mexico and Canada, with a 10% duty specifically on Canadian energy products. Goods from China will also be subjected to a 10% tariff, the White House confirmed. Trump justified the tariffs under the International Emergency Economic Powers Act (IEEPA), declaring a “national emergency” due to the influx of illegal immigrants and the smuggling of deadly fentanyl into the US.

Trump justifies tariffs as necessary for national security

“Today, I have implemented a 25% Tariff on Imports from Mexico and Canada (10% on Canadian Energy), and a 10% additional Tariff on China,” Trump stated in a Truth Social post. “This was done through the International Emergency Economic Powers Act because of the major threat of illegal aliens and deadly drugs killing our Citizens, including fentanyl. We need to protect Americans, and it is my duty as President to ensure the safety of all.”

Trump asserted that these tariffs align with his campaign promise to curb illegal immigration and drug trafficking. He emphasized that American voters overwhelmingly supported his stance, giving him the mandate to enforce stricter economic measures.

No exemptions, strict implementation of new duties

White House officials confirmed that there would be “no exemptions” to these tariffs, with the new order scrapping the "de minimis" provision that previously allowed tax-free imports on shipments valued under $800 from Canada.

While Mexican energy imports will be taxed at the full 25% rate, Canada’s energy sector received a partial reprieve, facing a reduced tariff of 10%. The tariffs will take effect at 12:01 a.m. EST (05:01 GMT) on Tuesday, applying to all imports arriving after the deadline.

Economic impact and market concerns

The tariffs are expected to have significant economic repercussions. Greg Daco, Chief Economist at EY, warned that the move could cut US economic growth by 1.5% this year and push Canada and Mexico into a recession.

“We have stressed that steep tariff increases against U.S. trading partners could create a stagflationary shock - a negative economic hit combined with an inflationary impulse - while also triggering financial market volatility,” Daco told Reuters.

While Trump’s administration insists the tariffs will remain in effect “until the crisis is alleviated,” there has been no clarity on what specific measures Canada and Mexico must take to qualify for exemptions.