President Donald Trump has enacted a 25% tariff on imports from Canada and Mexico, with an additional 10% levy on Chinese goods. These measures, effective immediately, represent the administration’s use of emergency economic powers.
How Will These Tariffs Affect Trade?
The new tariffs, which also include a 10% duty on Canadian energy imports, are expected to impact U.S. businesses and consumers significantly. Trade with Mexico, Canada, and China accounted for 40% of total U.S. goods trade in 2024, making these levies especially consequential.
Experts highlight that the tariffs take effect instantly, akin to flipping a switch. Businesses importing $100,000 worth of goods from Mexico, for instance, must now pay an additional $25,000 in duties. This immediate cost increase will likely trickle down to consumers through higher prices.
Consumer Impact: Higher Prices Ahead
According to the Tax Policy Center, the tariffs on Mexico and Canada alone could add $930 in annual expenses per U.S. household by 2026. Target CEO Brian Cornell has already warned investors that produce prices may begin rising within days due to the increased cost of Mexican fruit and vegetable imports.
Even if implemented with some delay, importers should brace for retroactive tax bills, further complicating financial planning.
Trump Expands Trade Pressure on China
Beyond North America, Trump has also escalated trade tensions with China by doubling tariffs to 20% on Chinese imports. In 2024, combined trade with Canada, China, and Mexico reached $2.2 trillion. Chinese-U.S. trade alone accounted for $582 billion of this figure.
The Power—and Limitations—of Emergency Tariffs
Trump’s ability to enact these tariffs stems from the International Emergency Economic Powers Act (IEEPA), usually reserved for emergency sanctions. The administration has argued that issues such as illicit fentanyl trade and border security justify the measures under national security grounds.
However, this broad use of emergency authority could trigger legal challenges. Additionally, logistical hurdles may cause delays, particularly concerning small-scale international shipments.
The “De Minimis” Dilemma
The administration initially sought to impose tariffs even on “de minimis” shipments—low-value parcels under $800. However, enforcement complications forced a temporary exemption. In 2024 alone, over 1.3 billion such shipments entered the U.S., largely driven by e-commerce platforms like Temu and Shein.
Without the necessary infrastructure to process tariffs on these massive volumes, the government faces a logistical challenge. Hiring more customs agents and developing new tracking systems will take time.
Delays and Policy Adjustments
Originally, the U.S. Postal Service (USPS) attempted to halt parcel services from China and Hong Kong, only to reverse its stance within a day. Ultimately, the administration postponed tariff collection on “de minimis” goods until systems are in place.
Similar exemptions were later announced for imports from Canada and Mexico. As of now, there’s no clear timeline for when tariff enforcement on these small-scale shipments might begin.
What’s Next?
While Trump’s aggressive tariff strategy underscores his administration’s willingness to disrupt global trade, its full impact on businesses and consumers will unfold in the coming months. The government must not only handle potential legal obstacles but also resolve logistical gaps in tariff collection.
For now, consumers should expect rising prices, and businesses reliant on international trade will need to adapt quickly to the changing landscape.
