2025 United States trade war with Canada and Mexico

A trade war involving the United States, Canada, and Mexico began on February 1, 2025, when U.S. president Donald Trump signed orders imposing near-universal tariffs on goods from the two countries entering the United States. The order called for 25 percent tariffs on all imports from Mexico and all imports from Canada except for oil and energy, which would be taxed at 10 percent.
In response, then-Canadian prime minister Justin Trudeau said Canada would retaliate with 25 percent tariffs on CA$30 billion (US$20.6 billion) of American goods, which would expand to CA$155 billion (US$106 billion) after three weeks. Mexican president Claudia Sheinbaum said Mexico would enact tariffs and non-tariff retaliation against the United States. On February 3, one day before they were set to take effect, both leaders negotiated a one-month delay for the tariffs.
The U.S. tariffs entered force on March 4; Canada's retaliatory tariffs began simultaneously, while Mexico said it would wait to retaliate. On March 6, Trump delayed tariffs on goods compliant with the United States–Mexico–Canada Agreement (USMCA)—accounting for about 50 percent of imports from Mexico and 38 percent of imports from Canada. Although the exemption was expected to close on April 2, the White House announced it would remain open indefinitely. However, the US added tariffs to all steel, aluminum, and automotive imports, including those from Mexico and Canada.
Trump has said the tariffs are intended to reduce the U.S.'s trade deficit with Canada and Mexico, force both countries to secure their borders with the U.S. against illegal immigration and fentanyl smuggling, and promote domestic manufacturing in the United States. Sheinbaum, Trudeau, and Trudeau's successor Mark Carney have called the U.S. tariffs unjustified and said they violate the USMCA. Trudeau said that Trump intends to use tariffs to force Canadian annexation into the United States, which Trump has suggested. Economists have said tariffs would likely disrupt trade between the three countries, upending supply chains and increasing consumer prices.
The US and Canada have maintained free trade agreements since 1988. The bilateral trade relationship between the United States and Canada is one of the world's largest, but Canada-U.S. trade comprises about a third of Canada's economy compared to only 3% of the U.S.'s. In the first nine months of 2024, Canadian government data estimated that CA$800 billion (US$550 billion) of goods crossed the Canada–U.S. border. More than 70 percent of Canadian exports go to the United States. The countries' energy and automotive markets are both highly integrated, and Canada is the U.S.'s largest supplier of both steel and aluminum. As of November 2024, the U.S. government estimated the United States's trade deficit with Canada to be US$55 billion. This deficit is primarily driven by American demand for Canadian oil; when oil exports are excluded, the U.S. has a trade surplus with Canada. Roughly 60 percent of oil imported by the U.S. is sourced from Canada, and Canada is the largest supplier of U.S. energy imports and second-largest recipient of U.S. energy exports. The increased value of U.S. imports from Canada is partially a result of the Russian invasion of Ukraine in 2022, which created global market instability and raised energy prices. Cars, trucks, other vehicles, and auto parts constitute 27 percent of Canadian exports to the United States.
The economies of the United States and Mexico are highly intertwined. In 2024, roughly US$800 billion of goods were transported across the Mexico–U.S. border, and over US$1 billion in commerce between the two countries occurs daily. In 2023, U.S. exports to Mexico totaled US$322 billion, while the U.S. imported over US$475 billion of Mexican products, according to data from the U.S. Census Bureau. More than 75 percent of Mexico's exports go to the United States. Roughly 70 percent of Mexico's natural gas consumption comes from the U.S., and the U.S. imports about 700,000 barrels of crude oil from Mexico each day. Food production between the two countries is also closely integrated: the U.S. sources roughly half of its fresh fruits and vegetables from Mexico, and Mexico is the top market for U.S. agricultural exports. Mexico is the third-largest exporter of steel to the U.S., behind only Canada and Brazil; both Mexico and the U.S. have been accused of violating an agreement signed alongside the USMCA to limit steel exports between each other. Some Americans, including Trump, have said that Mexico has exceeded the level of exports allowed under the agreement. At the same time, the Mexican steel organization Canacero reported that the level of U.S. steel exports also breached the deal.
The United States–Mexico–Canada Agreement (USMCA) which went into effect in 2020, updated the 1994 North American Free Trade Agreement (NAFTA). The region covered by USMCA is one of the world's largest free trade zones. NAFTA eliminated almost all tariffs on trade between the three countries. NAFTA has been described as a source of political division. In the U.S., it caused offshoring as U.S. companies relocated their businesses to Mexico for cheaper labor, harming American factory towns and workers. The backlash to free trade allowed candidates like Donald Trump supporting protectionist policies to rise to prominence in U.S. politics. However, many parts of the U.S. benefited from NAFTA's increased trade and economic activity. In 2020, during Trump's first term as U.S. president, NAFTA was replaced by the United States–Mexico–Canada Agreement (USMCA), primarily because Trump disagreed with NAFTA. Changes between NAFTA and the USMCA were largely cosmetic; the new agreement maintained zero tariffs on most products traded across the U.S., Canada, and Mexico, but allowed certain tariffs to be imposed for national security matters.
During his first term, Trump threatened tariffs on Mexico if it did not end illegal immigration to the United States across the U.S.–Mexico border and repeatedly threatened to withdraw from NAFTA. However, he ultimately did not impose tariffs on Mexico after it agreed to create the Mexican National Guard, send 6,000 troops to fight illegal immigration, and allowed the U.S. to expand its "remain in Mexico" policy, which forced certain asylum seekers to stay in Mexico until the U.S. processed their asylum claim. Trump pressured Canada and Mexico to renegotiate NAFTA by threatening aggressive import tariffs, and in May 2018, he extended the U.S.'s global tariffs on steel and aluminum to the two countries, inviting them both to retaliate. The three countries agreed to lift the steel and aluminum tariffs in May 2019, one year after they had begun, prior to the USMCA taking effect on July 1, 2020. One month after the USMCA entered force, Trump said that aluminum imports constituted a national security threat that endangered U.S. producers and imposed 10 percent tariffs on Canadian aluminum. Trump ended the tariffs the next month ahead of Canada's planned retaliation.
In 2018 and 2019, Trump also placed major tariffs on China, totaling about US$80 billion of tariffs on about US$380 billion of products, which were largely kept in place by the subsequent administration of Joe Biden. The U.S. government has been concerned over China–Mexico trade, particularly in the automotive sector, because it fears that Chinese companies can use Mexico to export to the United States, circumventing tariffs on China and taking advantage of the USMCA. From October 2023 to October 2024, U.S. authorities apprehended 23,000 people illegally crossing across its northern border from Canada and 1.5 million people illegally crossing its southern border from Mexico.
Trump's 2024 presidential campaign outlined an economic strategy that emphasized the use of tariffs to fund proposed tax cuts and incentive domestic manufacturing in the United States. In November 2024, after winning the U.S. presidential election, Trump threatened 25 percent tariffs on all products from Canada and Mexico, which he said would "remain in effect until such time as drugs, in particular fentanyl, and all illegal aliens stop this invasion of our country." Shortly after, Canadian prime minister Justin Trudeau—who has a contentious relationship with Trump—traveled to Trump's estate in Florida to speak with him and discuss the tariffs, as well as illegal immigration and drug smuggling across the Canada–U.S. border. On December 16, Canada announced a plan to spend CA$1.3 billion (US$913 million) on border security to allay Trump's concerns. The plan included the creation of a joint U.S.–Canada "strike force" intended to combat transnational crime.
On January 6, 2024, Trudeau declared his intention to resign as Liberal Party leader and prime minister after the election of a new leader on March 9. Doug Ford, the premier of Ontario and head of the Council of the Federation, called a snap provincial election to be held on February 27, saying that he wanted his Progressive Conservative Party of Ontario to have a stronger mandate to oppose Trump's impending tariffs on Canada. On January 31, Trudeau said on social media that Canada was "ready with a forceful and immediate response" if the U.S. moved ahead with its decision to impose tariffs on Canadian exports.
Since Felipe Calderón's tenure as president of Mexico in 2012, U.S. law enforcement agents based in Mexico were able to collaborate with their Mexican counterparts to gather intelligence, design operations, conduct anti-corruption investigations, and carry out institutional reforms. However, in 2019, Andrés Manuel López Obrador began to scale back international cooperation in the Mexican drug war as part of his "Hugs, not bullets" plan. Opioids, predominantly fentanyl, have killed over 500,000 Americans since 2012. The opioid epidemic in the United States is largely fueled by drugs smuggled from Mexico; approximately 98 percent of fentanyl entering the U.S. comes from Mexico, while less than 1 percent comes from Canada. In 2021 and 2022, during the worst years of the opioid epidemic, over 100,000 people in the U.S. died annually from drug overdoses. In October 2024, Claudia Sheinbaum was inaugurated as president of Mexico. She was described as taking "bold moves" against Mexican drug cartels. Trump's presidential campaign also pledged the mass deportation of illegal immigrants in the United States—the majority of which are from Mexico. In response, Mexican officials created an initiative called "Mexico Embraces You" to welcome deported migrants.
During his inaugural address on January 20, 2025, at the beginning of his second term, Trump said he would enact steep tariffs on other countries. He said that "Instead of taxing our citizens to enrich other countries", the U.S. would "tariff and tax foreign countries to enrich our citizens". Trump said that both Canada and Mexico are allowing "mass numbers of people to come in and fentanyl to come in" to the U.S. across their borders. Approximately 0.2 percent of fentanyl entering the U.S. comes from Canada, while 98 percent comes from Mexico. Trump launched a process to designate Mexican drug cartels and other criminal organizations as foreign terrorist organizations. He also threatened U.S. military intervention against cartels in Mexico. Trump also said both countries were unfairly profiting from the United States's trade deficits. He has criticized the United States's trade deficit with Canada while citing inaccurate figures that claim it to be as much as US$200 billion.
Even after Trump declared his intent to impose imminent tariffs on Canada and Mexico, U.S. companies did not make any concerted effort to import large amounts of goods to the United States before their enactment. On January 29, Sheinbaum said of Trump's threatened tariffs that "We don't think its going to happen really", and that "if it happens, we also have our [retaliation] plan", which she declined to detail. The Mexican foreign ministry said Mexican officials were in talks with the Trump administration.
Trump also made repeated calls for Canada to be annexed by the United States as its "51st state", and said that while he would not use military coercion, he could use "economic force" to bring about Canadian annexation. Since the trade war began, Trudeau has said that Trump's comments should be taken as a serious threat against Canadian sovereignty and that Trump seeks to control Canada to access its mineral resources. In an interview, Trump said that his suggestions to annex Canada were serious, and argued that the U.S. trade deficit with Canada was "essentially a subsidy" and that Canada would be "much better off" in the United States. Trump has argued that Canadian statehood would make tariffs "totally disappear", lower Canadian taxes, and make the country more secure militarily, and called the Canada–U.S. border an "artificial line that looks like it was done with a ruler". Trudeau has said that Canadian annexation is "never going to happen".
On February 1, 2025, Trump signed three executive orders imposing 25 percent tariffs on all goods from Mexico and Canada except for Canadian oil and energy exports, which received a 10 percent tariff. Mexican energy exports will receive the full 25 percent tariff. The orders were issued under the International Emergency Economic Powers Act (IEEPA) and were set to take effect at 12:01 a.m. Eastern Standard Time on February 4. Trump also ordered 10 percent tariffs on China, which would be imposed in addition to the existing tariffs of up to 25 percent on many Chinese goods. The orders included a clause allowing the U.S. to increase its tariffs if the countries respond with their own tariffs or other retaliatory measures.
Trump used the IEEPA—a 1977 U.S. law giving the president broad financial power during declared national emergencies—to circumvent the USMCA's tariff restriction for reasons other than national security, marking the first time the law was used to impose tariffs. Trump cited both the influx of illegal immigrants crossing the United States's borders with both Mexico and Canada, as well as the opioid epidemic in the United States fueled by fentanyl originating in China reaching the U.S. through Mexico and Canada. In the executive order, he said that Canada has played a "central role" in allowing fentanyl to enter the U.S. and that it has failed to "devote sufficient attention and resources or meaningfully coordinate" with the U.S. to "stem the tide of illicit drugs," despite the vast majority of fentanyl in the U.S. coming from the southern border with Mexico. The tariffs are also aimed at incentivizing manufacturers to hire Americans to make their products in the U.S. instead of importing them from other countries. In later remarks, Trump repeated his hope for Canada to be annexed by the United States, and said that it could do so to avoid tariffs.
According to Bloomberg News, Trump advisors Peter Navarro and Stephen Miller were the leading officials in the economic discussions regarding the imposition of tariffs. At the same time, China was included at the urging of the National Security Council. In a post on Truth Social, Trump said: "We need to protect Americans, and it is my duty as president to ensure the safety of all. I made a promise on my campaign to stop the flood of illegal aliens and drugs from pouring across our borders, and Americans overwhelmingly voted in favor of it." While he acknowledged that the tariffs could cause "temporary short-term disruption," he said that they needed to be imposed. Trump also claimed that "Tariffs don't cause inflation" but rather that "They cause success."
Hours after Trump imposed the tariffs on February 1, Trudeau said that Canada would retaliate against the United States with tariffs. He said that Canada would impose 25 percent tariffs on CA$30 billion (US$20.6 billion) of American exports immediately after the U.S. tariffs take effect and impose 25 percent tariffs on a further CA$125 billion (US$86 billion) worth of goods in the next three weeks. Trudeau said that the delay would allow Canadian businesses to prepare. He added that Canada was considering more retaliatory trade action in addition to tariffs to force Trump to end the trade war, including export restrictions on critical minerals and energy products or a block on American companies bidding on government contracts.
Trudeau said that American liquor, vegetables, clothing, shoes, and perfume would be among the first to face retaliatory tariffs and that tariffs on consumer goods such as household appliances, furniture, and sports equipment would also be imposed. Canada's retaliation is aimed mainly at "red states" of the U.S., led by Trump's Republican Party. In his speech, Trudeau presented data showing that only about 1 percent of fentanyl imports and illegal border crossings to the United States come from its border with Canada. He called the U.S.–Canada relationship "the most successful partnership the world has ever seen" across all domains and accused Trump's tariffs of violating the USMCA. He also said that the tariffs endanger American consumers and industries, calling Canadians to "choose Canadian products and services rather than American ones" wherever possible. Trudeau stated: "This is a choice that, yes, will harm Canadians, but beyond that, it will have real consequences for you, the American people. As I have consistently said, tariffs against Canada will put your jobs at risk, potentially shutting down American auto assembly plants and other manufacturing facilities."
Canada's premiers also responded. Ontario premier Ford said that Canada has "no choice but to hit back and hit back hard" and ordered the Liquor Control Board of Ontario to end sales of American alcohol. Alberta premier Danielle Smith, who had until then been opposed to aggressive trade action against the United States, said Canada needed to respond to Trump's "mutually destructive policy" and that she supported "the strategic use" of tariffs on U.S. goods "that are more easily purchased from Canada and non-U.S. suppliers". Premier François Legault of Quebec said he ordered Treasury Board president Sonia LeBel to "review all procurement contracts involving American suppliers" and penalize any that do business with Quebec's government. He also directed the Société des alcools du Québec to remove all American products from its shelves.
In Nova Scotia, Premier Tim Houston said the province will double highway tolls for U.S. vehicles and direct the Nova Scotia Liquor Corporation to stop selling all U.S. liquor by February 4. Northwest Territories premier R.J. Simpson also announced that his government would review its procurement policies to eliminate purchases from U.S. companies where possible. Premier Wab Kinew of Manitoba and Premier Dennis King of Prince Edward Island both said that their provinces would stop importing American liquor, while British Columbia premier David Eby said the BC Liquor Distribution Branch would halt liquor purchases from Republican-led states. On March 10, this was then expanded to ban all U.S. alcohol. Legislation is also planned on being introduced that would tariff U.S. vehicles driving to Alaska through the province. Yukon premier Ranj Pillai said his territory's government would halt orders of U.S. alcohol, review its contracts with U.S. companies, and consider tolls on U.S. vehicles, but later said the measures would be put on hold until tariffs came into effect.
Pierre Poilievre, the leader of the opposition Conservative Party, condemned what he called "massive, unjust and unjustified tariffs". He urged that the government end the current prorogation of parliament to retaliate with measures including dollar-for-dollar tariffs on U.S. goods that he said would raise money to help "affected workers and businesses". He also repeated his demand for a "massive" tax cut and other efforts to bolster the economy.
Sheinbaum had spoken to Trump before his inauguration to de-escalate his tariff threats. Trump said that Sheinbaum had agreed to "effectively closing" the Mexico–U.S. border border to avoid tariffs; Sheinbaum denied this, but said that "there will not be a potential tariff war". After Trump signed executive orders imposing 25 percent tariffs, Sheinbaum said Mexico would implement tariff and non-tariff retaliatory measures against the United States. She said the retaliation was "in defense of Mexico's interests". Sheinbaum did not specify which U.S. goods Mexico's retaliation would target, though media reports claimed Mexico had been preparing possible retaliatory tariffs ranging from 5 percent to 20 percent on pork, cheese, produce, steel, and aluminum; reports also claimed that Mexico intended to exempt the automotive industry from tariffs.
Marcelo Ebrard, Mexico's secretary of economy, called Trump's tariffs a "flagrant violation" of the USMCA. Sheinbaum also responded to Trump's claim that she has an alliance with the Mexican drug cartels, calling it "slander". At an event on February 1, she said Mexico would keep a "cool head" in proceeding with its retaliations, and she proposed establishing a task force with the U.S. to address Trump's issues with Mexico and said that "problems are not resolved by imposing tariffs".
On February 3, 2025, Sheinbaum and Trump mutually agreed to delay the tariffs on Mexico by one month, until March 4. Sheinbaum accepted sending 10,000 troops from the Mexican National Guard to their border to prevent drug trafficking. Trump said the U.S. had pledged to take measures to curb weapons trafficking to Mexico. During their call, Trump complemented Sheinbaum, telling her "You're tough". After their call, Sheinbaum directed Mexican law enforcement agencies to target fentanyl gangs, and Mexican police raided opioid labs and arrested cartel members. On February 27, Mexico transferred 29 cartel operatives, Sinaloa Cartel founding member Rafael Caro Quintero, to the United States to face criminal charges there. Sheinbaum's calm demeanor during calls with Trump and success in mitigating illegal immigration and fentanyl appeared to earn the respect of Trump and impressed members of his administration, including Stephen Miller, who is Trump's deputy chief of staff for policy and the U.S. homeland security advisor. Trump later described Sheinbaum as "a wonderful woman" with whom he has a "very good" relationship.
Trump also spoke to Trudeau on February 3. During their call, he introduced concerns that Canada was not allowing U.S. banks to "open or do business there"; Canada allows American banks to operate commercially in the country but had restricted personal banking to protect its citizens from bank failure. The Canadian Bankers Association said that 16 U.S.-based bank subsidiaries and branches with around CA$113 billion (US$78.6 billion) in assets are currently operating in Canada. After a second call that afternoon, Trump and Trudeau successfully negotiated a one-month delay on the tariffs.
Officials present for the call told The New York Times and the Toronto Star that in addition to concerns over banking, Trump also relayed grievances over Canada's protection of its dairy sector and Canadian consumption taxes that Trump said make American goods more expensive. Trump also said that the 1908 treaty between the United States and the United Kingdom that established the 49th parallel as the border between the U.S. and the dominion of Canada was invalid and that he wanted to revise it. Trudeau and his aides then scrambled to "google" the treaty, after which Trudeau told Trump that it had been superseded by the Canadian Constitution of 1982 and that the patriation of Canada from Britain under the premiership of Trudeau's father Pierre Elliott Trudeau had established Canada's full sovereignty over its territory.
Trump also mentioned during the call that he wanted to revisit the numerous treaties regulating the sharing of lakes and rivers between the U.S. and Canada. In addition, he raised Canada's level of defense spending, and questioned whether Canada does "anything" to contribute to the North American Aerospace Defense Command (NORAD), the joint U.S.–Canada air defense command that operates across North America.
Trudeau told Trump that Canada would appoint a "fentanyl czar", list Mexican drug cartels as terrorists, create an intelligence directive targeting fentanyl and organized crime supported by CA$200 million (US$140 million) in funding, and implement its CA$1.3 billion (US$913 million) border program and establish a Canada–U.S. joint strike force to combat organized crime, fentanyl, and money laundering. Trudeau also assured Trump that 10,000 personnel "are and will be" working on border security in Canada. In response, Trump issued an updated executive order changing the start date of the tariffs to March 4 at 12:01 a.m. Eastern Time. Trump wrote on social media after the call that he was "very pleased with this initial outcome" and the tariffs had been delayed "to see whether or not a final economic deal with Canada can be structured". On February 11, Canada appointed Kevin Brosseau, a former deputy national security advisor to Trudeau and former Royal Canadian Mounted Police senior, as the fentanyl czar.
After the call between Trump and Trudeau on February 3, Howard Lutnick, the incoming U.S. secretary of commerce called Dominic LeBlanc, the Canadian finance minister, who he had been communicating regularly since December 2024. Lutnick said that Trump had realized that the U.S.–Canada relationship was governed by a series of agreements that could quickly be abandoned. He said Trump was interested in dissolving arrangements related to sharing and managing the Great Lakes, and reviewing military cooperation between the two countries, including NORAD. Lutnick also said Trump wanted to remove Canada from the Five Eyes, an intelligence-sharing alliance between the U.S., Canada, United Kingdom, Australia, and New Zealand; the Financial Times reported that some officials in Trump's administration have sought to remove Canada from the alliance.
Marco Rubio, the U.S. secretary of state, dismissed that the U.S. was reconsidering military cooperation with Canada. However, Canadian officials, despite initially believing Trump's suggestions of annexing Canada into the United States to be a joke, began to interpret them as serious threats.
On February 10, 2025, Trump imposed 25 percent tariffs on steel and aluminum entering the United States from all countries, including Canada and Mexico, which provide most of the U.S.'s metal imports. The steel and aluminum tariffs are set to enter force on March 12. Trump said those tariffs were "the first of many", and that over the next four weeks, he would discuss tariffs on cars, pharmaceuticals, chips, and other goods with his team. In response, Trudeau called the tariffs "unacceptable" and said he hoped talks with the Trump administration would resolve the issue, but that Canada will have a "firm and clear" response if needed. Shares of U.S. steelmakers rose in response to Trump's order, while prices for steel and aluminum rose.
On March 3, Trump said that the tariffs that were delayed from February would take effect as planned on March 4, and that there was "no room left" for Canada or Mexico to negotiate a last-minute deal with the United States to delay them further. Lutnick said that both Canada and Mexico had made progress on improving border security, but that neither had satisfied the U.S.'s demands to halt the flow of fentanyl into the United States. Canadian foreign minister Mélanie Joly said that Canada was prepared to respond, while Sheinbaum reaffirmed that Mexico's prior response plans would take effect when Trump's tariffs were imposed. U.S. tariffs on Canada and Mexico began as scheduled, at 12:01 a.m. Eastern Time on March 4.
Canada's retaliation began simultaneously: 25 percent tariffs on CA$30 billion (US$20.6 billion) of U.S. goods took effect on March 4, and Trudeau affirmed that 25 percent tariffs on an additional CA$125 billion (US$86 billion) of U.S. goods would take effect 21 days later, on March 25. After the tariffs were imposed on March 4, Trudeau said in a news conference that Trump's "excuse" for the tariffs of fentanyl was "completely bogus" and "completely false", and that Trump was imposing tariffs because he wished for "a total collapse of the Canadian economy" to "make it easier" for the U.S. to annex Canada. Trudeau called Trump's decision to impose tariffs "very dumb", and said Canada would "not back down from a fight".
The onset of the tariffs led to stock market declines in the U.S., especially for retailers and car manufacturers. On March 5, Lutnick said Trump was "listening to the offers from Mexico and Canada" and "thinking about trying to do something in the middle", suggesting that tariffs could take effect at a less significant scale. Later that day, Trump granted a one-month exception from the tariffs for automakers compliant with USMCA regulations, which represent about 85 percent of passenger vehicles imported to the U.S. from Mexico in 2024. Trump decided after meeting with executives from the three largest U.S. automakers—Ford, General Motors, and Stellantis—who said that the tariffs would harm U.S. companies more than their foreign rivals.
After the U.S. tariffs entered force on March 4, Sheinbaum said she would announce Mexico's countermeasures, including retaliatory tariffs, on March 9. She cited plans to speak with Trump in the intervening days as the reason for her delayed response. Sheinbaum said that if the tariffs persisted, Mexico would "reach out to Canada and other nations" and could look for trading partners other than the U.S. or shift trade alliances "if necessary".
Trump and Sheinbaum spoke by phone on March 6. Sheinbaum began the call by listing to Trump her efforts to secure the Mexico–U.S. border and fight fentanyl trafficking, suggesting to him that the tariffs would make it more difficult for her to justify cooperation with the U.S. to a domestic audience. She sent Trump a chart showing how fentanyl seizures at the border had dropped dramatically since the 10,000 National Guard troops had arrived. During the call, Trump complimented Sheinbaum and asked her opinion of Trudeau, calling her "lucky" after she responded that they rarely talked. While Sheinbaum recounted that Trump initially refused to lift tariffs, by the end of their call Trump offered exclusions for many Mexican goods.
After speaking to Sheinbaum, Trump posted on social media that he would delay tariffs on all USMCA-compliant goods—which U.S. officials said account for 50 percent of U.S. imports from Mexico—until April 2 "out of respect" for Sheinbaum, and thanked her for her "hard work and cooperation". Immediately afterward, Sheinbaum wrote on Twitter that she and Trump had an "excellent and respectful" call and thanked Trump, saying the two had "agreed that our work and collaboration have yielded unprecedented results".
Trudeau and Trump had spoken by phone on March 5, and Trump said their conversation ended on a "somewhat 'friendly'" note. However, Canada was not extended the delay of tariffs on USMCA-compliant products until after Trump spoke to Sheinbaum on March 6. After Trump's announcement, which American officials said delayed tariffs on 38 percent of Canadian goods imported to the U.S. until April 2, Canadian officials said that the planned increases in their retaliatory tariffs would be suspended, though the initial tariffs on the U.S. would remain in place.
On March 7, Trump threatened reciprocal tariffs on Canadian lumber and dairy products. He said the tariffs would be as high as about 250 percent and take effect the following week. Later, Trump said that Canada "must immediately drop their Anti-American Farmer Tariff of 250 percent to 390 percent on various U.S. dairy products, which has long been considered outrageous." Canada's tariff-rate quota on U.S. dairy products allows a certain amount of U.S. dairy products to enter the country without facing tariffs, with high tariffs only imposed if the imports surpass a certain amount. Since U.S. dairy exports to Canada have never exceeded the quota, the Canadian tariffs have never been activated.
Beginning on March 10, Ontario imposed a 25 percent surcharge on electricity exports to the U.S. states of Michigan, Minnesota, and New York. The next day, Trump said that Canada would face 50 percent tariffs on steel and aluminum on March 12, rather than the 25 percent tariffs imposed on every other country. Ford said that afternoon that he would suspend the surcharge on electricity exports, saying "The temperature needs to come down." In response, Trump said that the U.S. would only impose 25 percent tariffs on Canadian steel and aluminum. On March 13, the day after those tariffs entered force, Canada imposed 25 percent tariffs on an additional CA$29 billion (US$20 billion) of U.S. goods. In a joint statement, Ford and Lutnick said that U.S. and Canadian officials would meet in Washington, D.C., on March 13 to discuss a "renewed USMCA".
On March 9, Mark Carney won the Liberal Party leadership election to succeed Trudeau as Canadian prime minister. In his acceptance speech, he said that he supported the Trudeau government's retaliatory tariffs and that his government would keep them in place "until the Americans show us respect." As prime minister–designate, he called Trump's threats to impose tariffs on dairy and metals "an attack on Canadian workers, families, and businesses", and that his government would ensure that its response had a "maximum impact in the U.S. and minimal impact here in Canada." He added that tariffs would remain until the U.S. made "credible, reliable commitments to free and fair trade." Carney was sworn in on March 14, beginning his premiership.
Trump has said he will impose "reciprocal" tariffs on all countries beginning in April 2. Regarding Canada, he said that if it did not drop "egregious, long time Tariffs" by April 2, he would "substantially increase" tariffs on Canadian cars entering the U.S. to "essentially, permanently shut down the automobile manufacturing business in Canada." Trump later announced that 25 percent tariffs on all imported cars and car parts would enter force on April 2. In response, Carney said that "it clear that the United States is no longer a reliable partner", and that while "it is possible that, with comprehensive negotiations, we will be able to restore some trust", "there will be no turning back" in the Canada–U.S. relationship.
Carney and Trump spoke directly for the first time in a phone call on March 28. Carney called the call "very cordial" and "substantial", and said that Trump "respected Canada's sovereignty". Trump described his call as "extremely productive" and said that he and Carney "agree on many things". Trump referred to Carney as the "prime minister of Canada", whereas he had addressed Trudeau as the "governor" of the U.S. state of Canada. In addition, Trump said that he believes "things will work out very well between Canada and the United States". Carney told Trump that Canada would respond with retaliatory tariffs if the U.S. tariffs planned for April 2 came into effect. Both leaders agreed to start "comprehensive negotiations about a new economic and security relationship" between Canada and the U.S. after the Canadian federal election on April 28.
On April 2, when Trump imposed universal 10 percent tariffs on imports from all countries, Canada and Mexico were exempted; the countries faced no new tariffs from the U.S. and most USMCA-compliant goods remained exempt from the tariffs. The same day, the U.S. Senate approved by a vote of 51 to 49 a measure that would revoke some of Trump's tariffs on Canada. Four senators from the Republican Party (Susan Collins, Lisa Murkowski, Rand Paul and Mitch McConnell) joined all of the opposition Democratic Party senators in passing the resolution. However, the measure also needs to pass in the Republican-controlled House of Representatives to take effect, in which Republican leaders have much more power to block it.
The trade war led investors to fear that tariffs could create inflation by causing rises in both manufacturing costs and consumer prices, leading to volatility in the U.S. stock market. Trump has characterized the economy as being in "period of transition" for the start of his presidency. On March 3, after Trump confirmed the imposition of tariffs on Canada and Mexico, as well as the increase of tariffs on China from 10 percent to 20 percent set to take place the same day, the U.S. stock markets dropped considerably: the S&P 500 index fell by 1.8 percent, while the Nasdaq-100 index fell by 2.6 percent. By March 6, the S&P 500 had lost almost all of its gains since November 2024.
On March 9, Trump declined to say whether his policies could lead to a recession in the United States. He said in an interview with Fox News that it would take time to see the payoff from his policies, but that they would ultimately be worthwhile, saying "If you look at China, they have a 100-year perspective. We have a quarter. We go by quarters, and you can't go by that. You have to do what's right." The next day, the S&P 500 dropped an additional 2.7 percent—its largest single-day drop of 2025—and the Nasdaq by 4 percent. On March 10, the S&P 500 fell by 1.4 percent, pushing it into a correction, which is defined as a fall in a stock market index of over 10 percent from its peak; the S&P 500 was 10.1 percent lower than its record high, which was on February 19. The market's losses were equivalent to over US$4 trillion in value; the Nasdaq-100 and Russell 2000 indices had already entered corrections. On March 11, the S&P 500 rose by 2.1 percent, exiting a correction, though ending the week down 2.3 percent.
In Canada and Mexico, stock markets were more stable. By March 6, Mexico's most prominent stock market index, the Índice de Precios y Cotizaciones, had risen 6 percent since the beginning of 2025. Canada's benchmark index, the S&P/TSX, was almost the same level it began the year.
On April 3, the day after April 2, or "Liberation Day", when the finalized tariffs were imposed on their respective countries, the S&P 500 dropped 4.8%, the NASDAQ dropped 5.9%, and the DJIA dropped 4%. This was followed by repercussive losses, similar in magnitude, and the most significant single-day drop since the 2020 COVID Pandemic.
The United States tariffs and threats against Canada have harmed historically strong Canada–U.S. relations, caused increases in Canadian nationalism and patriotism, and led to an uptick in anti-Americanism.
In February 2025, a poll by the Angus Reid Institute found that 91 percent of Canadians expressed a desire to decrease Canada's reliance on the U.S. as a trade partner; it also showed a 10 percentage-point increase in Canadians saying they are "very proud" of and "have a deep emotional attachment" to Canada compared to December 2024. An Ipsos poll in February 2025 found that, after Trump's threats, 68 percent of Canadians thought less of the United States, while 65 percent said they would avoid traveling to the U.S. and 67 percent said they would avoid buying U.S.-made products. The same month, a Léger poll found that 27 percent of Canadians considered the U.S. an "enemy", while only 1 percent of Americans thought the same of Canada.
In the days after the initial tariff announcements, Canadian crowds booed the U.S. national anthem at sporting events featuring American teams. Many Canadians began a boycott of American goods and of travel to the United States and a "Buy Canadian" movement gained traction across the country. As prime minister, Trudeau supported the Canadian boycott.
Many Canadian politicians, including Trudeau and Poilievre, adopted the rhetoric of national unity, and the trade war and conflict with the U.S. created a rally 'round the flag effect in the lead-up to the 2025 Canadian federal election. Both Canadians across the political spectrum and Canadian society at large have grown concerned over threats from the United States; Canadian politicians have been incentivized to "push back immediately and forcefully" against Trump and the U.S. because of the threats to Canadian sovereignty. The trade war also increased support for the removal of trade barriers between Canada's provinces, which Trudeau said that all premiers support but that "challenges within bureaucracies" persist.
Whereas in early January 2025 the Liberals had trailed the Conservatives in federal election opinion polls by over 20 points for months, the party began to close the gap in polls after the trade war began and Trudeau announced his resignation. Support for the New Democratic Party and Bloc Québécois also fell dramatically, and polling has suggested a close race between the Carney-led Liberals and the Poilievre-led Conservatives.
In February 2025, following Trump's initial announcement, Canadian travel to the United States dropped by 40 percent compared to February 2024. A March 2025 Abacus Data poll found that 62 percent of Canadians planned to avoid traveling to the U.S. for the next year, and American tourism groups are worried they will lose Canadian tourist traffic. The mayor of Haines, Alaska, a town connected to the outside world only through Yukon, has expressed concern that the tariffs will affect the normally friendly relations between Americans and Canadians. The shift in Canadian travel away from the U.S. could amount to an annual loss of US$4 billion for the U.S. economy. In March 2025, the Trump administration said that beginning on April 11, 2025, Canadians entering the U.S. for more than 30 days are required to register with authorities and be fingerprinted.
The tariffs could affect negotiations on renewing the USMCA, for which a review is due in 2026. Trump has ordered U.S. officials to review and report how to correct "unfair" trade practices by April 1, 2025. Canadian officials have grown concerned that Trump may threaten tariffs to force changes to the agreement.
In the United States, a February 2025 survey by The Harris Poll for Bloomberg News found that around 60 percent of Americans believe that high tariffs could cause consumer prices to rise. The following month, a poll by the University of Michigan found that the number of Americans expressing confidence in the economy fell by 11 percent in March 2025, and that the number expecting inflation rose. In the United States, Trump's initial decision to impose tariffs on Canada and Mexico was criticized by the editorial board of The Wall Street Journal, which said that his "justification for this economic assault on the neighbors makes no sense" and that Trump had begun "the dumbest trade war in history".
Many Americans believe Trump's threats to annex Canada are a joke or a negotiation strategy, and Trump's tariff policy in general raised questions about whether he has a serious intent to impose tariffs or whether his orders to impose them are threats intended only to serve as a negotiation tactic. The imposition and rollback of tariffs created uncertainty for many businesses, and has led to an erosion of international confidence in the U.S. as a reliable trade partner.
According to Deutsche Welle, Trump's imposition of tariffs on Canada and Mexico violated both the USMCA and the rules of the World Trade Organization (WTO), of which all three countries are members. On March 13, 2025, the WTO said that Canada had formally requested to begin dispute resolution proceedings with the United States, saying that the tariffs violated the U.S.'s commitments under the 1994 General Agreement on Tariffs and Trade.
In Mexico, the government and local businesses aimed to bolster a "Made in Mexico" campaign to promote domestic products. Some Mexicans called for boycotts of U.S. products after Trump's initial threat of tariffs, and a poll by the Mexican firm Buendía & Márquez found that 80 percent of Mexicans held a negative opinion of Trump in mid-February 2025, an increase from 66 percent in early January. Sheinbaum's approval rating also rose, with some polls in February 2025 suggesting that it exceeds 80 percent.
The European Commission—the executive branch of the European Union—condemned U.S. tariffs on Canada and Mexico, and called for the U.S. to "reconsider its approach".
The trade war is expected to significantly disrupt trade between the United States, Mexico, and Canada and upend supply chains across North America. Many economists have expressed skepticism over the effectiveness of Trump's strategy in imposing tariffs, and many have said that increased tariffs would raise the prices of consumer goods in the U.S. and worsen the country's cost-of-living crisis. The Budget Lab at Yale University estimated that the tariffs would lead to a loss of about US$1,200 in purchasing power for the typical American household. While some companies will opt to bear the cost of the tariff, others are likely to raise prices on consumer products to offset lost revenue or attempt to negotiate lower prices for their products.
Because the United States does not produce enough oil to satisfy its demand, 10 percent tariffs on Canadian oil and energy will likely lead to an increased oil price across the United States. This is especially true in the Midwest, a region heavily reliant on oil imported from Alberta. The Canadian government had previously said that U.S. gas prices could increase by US$0.75 per gallon overnight if tariffs were imposed. Tariffs could also increase the cost of electricity in some U.S. states, especially those that rely on Canadian provinces like Ontario, Quebec, and British Columbia for energy. Outside North America, tariffs on energy imports would give European and Asian oil refineries a competitive advantage against their rivals.
The tariffs could also lead to price increases in various U.S. imports from Mexico and Canada, including fruits, vegetables, beer, liquor, and electronics from Mexico and potatoes, grains, lumber, and steel from Canada. Price increases would compound with high inflation in the U.S., especially in grocery prices. The cost of Canadian lumber, used by many homebuilders in the U.S., would also likely increase. The tariffs would also cause risk to the U.S. farming and fishing industries.
The tariffs pose a risk of "severe recession" in Mexico if maintained. A year-long 25 percent tariff could cause Mexican exports to fall by around 12 percent, ultimately leading to a 4 percent decline in the country's gross domestic product in 2025. The American Chamber of Commerce in Mexico, the group representing U.S. companies in the country, said tariffs would harm both economies and "fail to address the real challenges of security, migration and drug trafficking". The Mexican automobile industry is likely to be most susceptible to upheaval from the tariffs, alongside the electric equipment sector, making it the largest beneficiary of the reprieve given to USMCA-compliant car imports.
Canada, a highly trade-dependent economy, will also likely suffer, experiencing harmed economic growth and increased prices for businesses and consumers. The Canadian economy could enter a recession within six months if the tariffs are maintained. Quebec premier Legault said that the U.S. tariffs could cause the loss of as many as 100,000 Canadian jobs within the province. Prices could also increase in Canada for even domestically produced products, mainly if the tariffs cause economic difficulties for smaller businesses. Canadian companies being unable to sell their products to Americans at the same volume would also cause some of them to cut workers, scale back, or even shut down entirely. Canada's mineral processing industry will likely be significantly harmed by the tariffs.