U.S. 25% Tariff on Canada and Mexico Imports In Effect March 4th

Trade Update • Feb 24, 2025

uring a press conference with French President Emmanuel Macron at the White House on Monday, February 24, 2025, Trump was asked whether he planned to proceed with tariffs against the United States’ closest neighbours.

“The tariffs are moving forward as planned, on schedule,” Trump confirmed.

His executive order, which enforces a 25 percent tariff on all Canadian and Mexican imports and a reduced 10 percent levy on Canadian energy, was postponed until March 4 after Canada and Mexico agreed to implement new security measures at the border.

Read More: Key Details on U.S. Tariffs & Canada’s Retaliatory Tariffs.

Note: GHY will continue to provide updates as they come – with expected further details to be released by the USA in the Federal Register and Canada’s International Trade and Finance Policy.

U.S. to Implement Tariffs

On February 1, 2025, President Donald Trump signed an executive order imposing a 25% tariff on imports from Canada and Mexico, with a 10% tariff on Chinese goods. While the original executive order was tied to the flow of deadly fentanyl, the president said earlier this month the pause would allow time to reach a “final economic deal.” These tariffs are set to take now take effect on March 4, 2025.

Under the order:

• A 25% tariff will apply to all Canadian and Mexican goods crossing the border after midnight on March 4, 2025.
• A 10% tariff will be imposed specifically on energy imports from Canada.
• The de minimis exemption for duty-free imports from Canada and Mexico will be eliminated.
• A 10% tariff is in effect on Chinese goods, extending beyond previous tariff schedules.

The executive order, citing the International Emergency Economic Powers Act (IEEPA), the National Emergencies Act (NEA), and the Trade Act of 1974, argues that illicit opioids and drug trafficking networks constitute an ongoing national emergency. It accuses Canada of failing to coordinate effectively with U.S. law enforcement to curb fentanyl production and trafficking.

Canada’s Response

In response to the U.S. tariffs, Canadian Prime Minister Justin Trudeau announced a $155 billion retaliatory tariff package – full list here. This was delayed on Feb. 3, 2025, surely to be reinstated after Trump’s announcement.

The initial phase includes a 25% tariff on $30 billion worth of U.S. goods, targeting products such as:

• Orange juice
• Peanut butter
• Wine, spirits, beer, and coffee
• Appliances
• Apparel and footwear
• Motorcycles
• Cosmetics
• Pulp and paper

A second phase, involving an additional $125 billion in tariffs, will be finalized after a 21-day public consultation period. Potentially affected products include:

• Passenger vehicles
• Steel and aluminum products
• Fruits and vegetables
• Aerospace products
• Beef, pork, and dairy
• Trucks, buses, recreational vehicles, and boats

China Surtax Remission Order In Effect

This remission order is intended to minimize the negative effects on Canadian companies and the economy of the 25% surtax payable on certain steel and aluminum goods imposed by the China Surtax Order (2024), which came into effect on October 22, 2024.

Full Details Here: China Surtax Remission Order In Effect

Mexico’s Response

Mexican President Claudia Sheinbaum strongly criticized the U.S. measures, rejecting claims that her government was complicit in cartel activities. “We categorically reject the White House’s slander that the Mexican government has alliances with criminal organizations, as well as any intention of meddling in our territory. If the United States government and its agencies wanted to address the serious fentanyl consumption in their country, they could fight the sale of drugs on the streets of their major cities, which they don’t do and the laundering of money that this illegal activity generates that has done so much harm to its population,” Sheinbaum wrote in her post on X.

Sheinbaum directed Economy Secretary Marcelo Ebrard to implement a “Plan B” involving both tariff and non-tariff retaliatory measures, though specifics remain undisclosed. In addition, she called for a bilateral working group to address the fentanyl crisis, emphasizing that “dialogue, not economic warfare, is the solution.”

U.S.-Mexico Agreement

President Trump and President Sheinbaum reached an agreement to originally pause the imposition of the 25% tariffs on Mexican goods for one month. In return, Mexico has agreed to deploy 10,000 National Guard troops to reinforce the U.S.-Mexico border and help combat fentanyl distribution into the U.S. Additionally, the U.S. will collaborate with Mexico to prevent the trafficking of weapons into Mexico. The agreement was reached during a call between Sheinbaum and Trump, and work will commence immediately in the areas of security and trade. (NY Post)

China’s Response

China’s position is firm and consistent. Trade and tariff wars have no winners. The U.S.’s unilateral tariff hikes severely violate WTO rules. This move cannot solve the U.S.’s problems at home and more importantly, does not benefit either side, still less the world.

China is one of the world’s toughest countries on counternarcotics both in terms of policy and its implementation. Fentanyl is an issue for the U.S. In the spirit of humanity and goodwill, China has given support to the U.S.’s response to this issue. At the U.S.’s request, China announced back in 2019 the decision to officially schedule fentanyl-related substances as a class. We are the first country in the world to do so. China has conducted counternarcotics cooperation with the U.S. side in a broad-based way. The achievements we have made are there for all to see. The U.S. needs to view and solve its own fentanyl issue in an objective and rational way instead of threatening other countries with arbitrary tariff hikes. Additional tariffs are not constructive and bound to affect and harm the counternarcotics cooperation between the two sides in the future.

China calls on the U.S. to correct its wrongdoings, maintain the hard-won positive dynamics in the counternarcotics cooperation, and promote the steady, sound and sustainable development of China-U.S. relationship. (FMPRC)

Industry Concerns

The National Association of Manufacturers (NAM) expressed deep concern over the tariffs’ impact on North American supply chains. Jay Timmons, NAM President and CEO, warned that one-third of critical U.S. manufacturing inputs come from Canada and Mexico, and a 25% tariff could disrupt production, increase costs, and threaten American jobs—particularly for small and medium-sized enterprises.

“However, with essential tax reforms left on the cutting room floor by the last Congress and the Biden administration, manufacturers are already facing mounting cost pressures. A 25% tariff on Canada and Mexico threatens to upend the very supply chains that have made U.S. manufacturing more competitive globally. The ripple effects will be severe, particularly for small and medium-sized manufacturers that lack the flexibility and capital to rapidly find alternative suppliers or absorb skyrocketing energy costs. These businesses—employing millions of American workers—will face significant disruptions. Ultimately, manufacturers will bear the brunt of these tariffs, undermining our ability to sell our products at a competitive price and putting American jobs at risk.” (NAM)

Potential Economic Impacts

Economists warn that escalating tariffs could lead to higher consumer prices, supply chain disruptions, and job losses. The automotive, energy, and agricultural sectors are expected to bear the brunt of these trade barriers.

• Automotive Industry: Higher tariffs on steel and aluminum could increase vehicle production costs.
• Energy Sector: A 10% tariff on Canadian energy imports may drive up fuel prices in the U.S.
• Agriculture: U.S. farmers and ranchers, already facing challenges from previous trade disputes, could experience further market access restrictions.

The full economic impact will depend on the duration of the tariffs and any potential negotiations among the affected nations.

The imposition of new tariffs by the United States and the retaliatory actions by Canada and Mexico have heightened trade tensions in North America. As each country moves to protect its interests, these developments highlight the complexity of North American economic interdependence.

Businesses and policymakers alike are closely monitoring the situation, hoping for a resolution that prevents further economic disruption and maintains the stability of cross-border trade.

How GHY Can Help?

GHY specializes in helping businesses navigate and reduce the impacts of tariffs through strategic solutions tailored to their needs. Our experts can audit your supply chain to identify inefficiencies, uncover cost-saving opportunities, and ensure compliance with evolving trade regulations. We also employ tariff engineering techniques to optimize product classification and sourcing strategies, minimizing duty exposure and maximizing profitability.

By partnering with GHY, your business gains access to the tools and expertise needed to streamline operations and stay competitive in a challenging trade environment.

Contact Us Today! gts@ghy.com, or call +1 (800) 667-0771.