Trump Announces 25% Tariffs on Canada and Mexico, Opening Salvo of Trade War; Canada Retaliates; 30-Day Pause After 3 Days

On February 1, 2025, President Trump signed three executive orders imposing 25% tariffs on virtually all imports from Canada and Mexico, plus 10% on imports from China, effective February 4. Canadian energy exports faced a lower rate of 10%. The administration cited fentanyl trafficking and border security as justification under the International Emergency Economic Powers Act (IEEPA).

The Tariffs

• 25% ad valorem on all imports from Canada and Mexico
• 10% on Canadian energy (oil, natural gas, electricity, uranium)
• 10% on Chinese imports (on top of existing tariffs)
• Effective date: 12:01 a.m. EST, February 4, 2025

The tariffs represented the most aggressive unilateral trade action in decades, targeting America’s two largest trading partners and closest geographic allies simultaneously.

Canadian Retaliation

Within hours, Prime Minister Justin Trudeau announced Canada would retaliate dollar-for-dollar:

• Immediate: 25% tariffs on CA$30 billion (US$20.6 billion) of American exports
• Within three weeks: 25% tariffs on an additional CA$125 billion (US$86 billion) in American goods

Mexican Response

President Claudia Sheinbaum announced retaliatory measures and signaled willingness to negotiate, while deploying 10,000 National Guard troops to the border as a concession on the fentanyl pretext.

30-Day Pause (February 3)

Just two days later, on February 3, Trump announced a 30-day pause on tariffs for both Canada and Mexico after phone calls with Trudeau and Sheinbaum. Both countries offered border security concessions that allowed Trump to claim a negotiating victory. The tariffs on China proceeded as scheduled on February 4.

Significance

The announcement-retaliation-pause cycle established a pattern that would repeat throughout 2025: dramatic tariff threats designed to extract concessions, followed by partial or temporary retreats. Markets whipsawed with each announcement, creating conditions that would later raise serious questions about market manipulation by administration insiders. The use of IEEPA — an emergency powers statute — to impose tariffs on allies over trade disputes represented a significant expansion of executive power that courts would later strike down.