President Donald Trump’s new tariffs on imported goods from Canada, Mexico, and China — which together accounted for almost 42% of total imports in 2024 — have now gone into effect.
The tariffs that went into effect early Tuesday include 25% duties on all Mexican goods and most Canadian goods, and 20% on goods imported from China. The duties on Canadian goods include a carveout for energy products, which will be taxed at 10%, in an effort to keep gas prices more manageable.
Most, if not all, U.S. industries will be impacted by the tariffs, from retailers to restaurants to the automotive industry. The National Restaurant Association has warned that tariffs on Mexico and Canada could lead to higher menu prices, putting the burden on consumers, while cars could become more expensive by thousands of dollars.
Countries affected by tariffs don’t actually pay the new fees. Instead, border agents collect the federal government’s cut from the company that’s paying to import a foreign product. Businesses often can’t afford to absorb the full brunt of those fees, so they pass along the price to consumers.
“Over time, they are a tax on goods. I mean, the Tooth Fairy doesn’t pay ‘em!” Berkshire Hathaway CEO Warren Buffett recently explained. “And then what?”
Part of Trump’s support of tariffs comes from his belief that they can be used to tighten trade deficits with other nations. The self-styled “Tariff Man” also thinks the punitive duties can force other countries to make non-economic concessions. His stated reasoning for the tariffs on China, Canada, and Mexico is a failure to prevent fentanyl from being trafficked to the U.S.
Another factor at play is the idea that raising tariffs will force companies to move production to the U.S. During a Monday news conference announcing a $100 billion commitment from TSMC to invest in the U.S., Trump said companies will “have no tariffs” as long as they make products domestically.
Although some companies have publicly discussed such an effort, several have said it would be a difficult and years-long effort. Under pressure from several factors, including factory disruptions and an earlier trade war, Apple shifted some iPhone production out of China and into India, rather than the U.S.
“Many companies that have tried to build supply chains here in the U.S. have not been successful because they’re so complex, because of the quantities of labor and technical expertise that you need,” Best Buy CEO Corie Barry told MPR News last month.
Read more: What Walmart and 13 other companies have said about Trump’s tariffs
The tariffs are set to be met with retaliation from all parties involved, setting up a potentially brutal trade war.
The Dow Jones Industrial Average dropped almost 650 points on Monday, with a significant decline coming as Trump announced there was “no room left” to make a deal delaying his tariffs. The Nasdaq was down almost 500 points when the market closed, while the S&P 500 shed just shy of 105 points.
Canada last month outlined a $155 billion tariff package to retaliate against the U.S., and several premiers have discussed their own measures. Ontario Premier Doug Ford’s plan to “win this tariff war” includes a removal of all U.S. alcohol from the shelves of LCBO and canceling a contract with Elon Musk’s Starlink. Ford had made a similar threat in early February.
President Claudia Sheinbaum of Mexico on Monday said the nation has “a plan B, C, D” of how to respond to the U.S., without elaborating. She had earlier directed Mexico’s economy secretary to prepare a series of tariff and non-tariff retaliatory measures.
China, which was hit with an initial 10% tariff last month, has already retaliated with a lawsuit at the World Trade Organization, tariffs, export controls, and targeted actions at companies like Alphabet’s Google and Illumina. Beijing has vowed to “take all necessary countermeasures.”
Trump on Monday said he wouldn’t outline a limit for how high his tariffs on China could be raised. He also declined to answer when asked if he had spoken to China’s President Xi Jinping.
Wendon Zhang, a professor of applied economics and policy at Cornell University, estimates that the tariffs could shed 0.4% of real gross domestic product (GDP) loss from the U.S. economy. That comes out to a loss of more than $100 billion.
But that’s just the potential impact of the tariffs going into effect Tuesday.
Trump’s proposed duties on foreign steel and aluminum are set to go into effect on March 12 and a plan for so-called reciprocal tariffs is expected to be on his desk as soon as April 1. The European Union is also likely facing new duties of 25%, according to the president.
“I don’t think Trump... really has an objective with” his tariffs, said Susan Ariel Aaronson, a senior fellow at the Center for International Governance Innovation and George Washington University professor, likening his use of the tool to a Swiss Army knife.
“He is happy to see ‘x’ change sometimes, and not happy enough to see ‘y’ change,” Aaronson said. “There’s no rhyme or reason to that. That is really bad for business.”