President Donald Trump said he planned to implement a 25% tariff on products from Canada and Mexico on Feb. 1, raising fears of another trade war that could raise consumer food prices and push up costs for agricultural producers.
Trump told reporters Monday night that he was considering tariffs on both countries over immigration concerns, saying Mexico and Canada allow “mass numbers of people to come in and fentanyl to come in.”
The comments capped Trump’s first day in office, which was marked by a flurry of executive orders and pardons. While Trump stopped short of implementing new tariffs, he issued a memorandum Monday directing federal agencies to evaluate U.S. trade policy, paving the way for potential new duties.
In Monday’s memorandum, Trump called on the Secretary of Commerce, the Secretary of the Treasury and the U.S. Trade Representative to investigate the causes of the U.S. trade deficit and recommend potential remedies, including global supplemental tariffs. Agencies have until April 1 to report their findings and provide recommendations.
The president also directed agencies to review potentially unfair trade practices by other countries and the impact of the U.S.-Mexico-Canada Agreement on the U.S. In addition, Trump singled out the U.S.’ trade agreement with China for review by the USTR to determine whether to raise tariffs on imports from the country.
During his inauguration address on Monday, Trump indicated his intent to “overhaul” the U.S. trade system. He added that the U.S. “will tariff and tax foreign countries” and establish an “external revenue service to collect all tariffs, duties and revenues.”
Tariffs on Mexico and Canada have the potential to upend increasing agricultural trade between the U.S. and its neighbors. Mexico and Canada have emerged as top export markets for U.S. farmers in the aftermath of Trump’s first trade war, which mainly targeted China.
New tariffs could make U.S. exports less competitive on the global stage, providing an opportunity for competitor Brazil to gain further market share. It could also raise prices or create supply disruptions for a wide variety of food and beverage products.
Mexico is a major supplier to the U.S. for fresh fruit and vegetables, plus beer and distilled spirits, according to the International Food Policy Research Institute. Canada, meanwhile, is a large provider of baked goods and cereals, in addition to ingredients like vegetable oils.