President Donald Trump implemented broad tariffs at midnight on imports from Canada and Mexico while also increasing duties on Chinese goods. In response, Mexico’s president announced retaliatory tariffs set to take effect on Sunday.
The new tariffs impose a 25% duty on imports from Canada and Mexico. Additionally, Trump raised tariffs on Chinese imports, doubling the existing 10% duty imposed in February. Economists have cautioned that such aggressive trade policies could have global repercussions, including inflation that could negatively impact consumers.
Following Trump’s announcement on Monday, the stock market experienced a sharp downturn. The S&P 500 declined by 1.8%, marking its worst performance since December and pushing it into negative territory for the year. On Tuesday, stocks remained under pressure, with the Nasdaq Composite nearing correction territory.
Bernstein analysts predict the auto sector will be particularly hard hit by the tariffs. The firm referred to the policy as “the return of the tariff man,” estimating that it could create a $110 million daily burden for the industry.
“If trade flows remain unchanged, we project an annual impact of up to $40 billion on the U.S. automotive sector,” wrote analyst Daniel Roeska. “However, proactive strategies—such as building up inventory, reallocating production, and reducing imports from Mexico—could mitigate the overall burden. In the initial weeks, the industry may manage to keep additional costs minimal, but prolonged tariffs will increase risks significantly.”
He further warned that in the long run, tariffs could slash free cash flow for the automotive industry by up to 60%.
New England Governors Raise Concerns Over Higher Energy Costs
Governors from New England voiced concerns that Trump’s 10% tariff on energy imports from Canada could drive up gasoline and home heating prices.
Massachusetts Governor Maura Healey stated on Monday that the tariffs would cause energy costs to “skyrocket,” estimating an annual cost of $370 million for Massachusetts and $1 billion for the entire New England region.
Maine Governor Janet Mills emphasized that her state’s economy is “deeply intertwined” with Canada, adding that Maine depends more on Canadian home heating oil than any other state. More than 80% of its gasoline and heating oil is imported from Canada.
Trump’s energy tariffs target a wide range of imports, including crude oil, natural gas, refined products, uranium, coal, biofuels, geothermal energy, hydroelectric power, and critical minerals.
Trump Falsely Claims U.S. Banks Are Barred from Canada
On Tuesday, Trump inaccurately stated that American banks are prohibited from operating in Canada, following the imposition of a 25% tariff on Canadian imports.
“Canada doesn’t allow American Banks to do business in Canada, but their banks flood the American Market. Oh, that seems fair to me, doesn’t it?” he posted on Truth Social.
However, despite Canada’s highly regulated banking sector, American banks are permitted to operate within the country.
Trump Encourages Companies to Shift Manufacturing to the U.S.
Trump reiterated that businesses manufacturing in the U.S. would avoid tariffs.
“IF COMPANIES MOVE TO THE UNITED STATES, THERE ARE NO TARIFFS!!!” he stated in a social media post on Tuesday.
Best Buy CEO Warns of Consumer Price Increases
Best Buy CEO Corie Barry cautioned that tariffs are “highly likely” to result in higher consumer prices.
“Trade is critically important to our business and industry; the consumer electronic supply chain is highly global, technical, and complex,” Barry said. “We expect our vendors across our entire assortment will pass along some level of tariff costs to retailers, making price increases for American consumers highly likely.”
Barry revealed that 60% of Best Buy’s product costs originate from China, while Mexico is the company’s second-largest importer.
Mexico Vows to Defend Its Sovereignty
Mexico’s President Claudia Sheinbaum announced plans to counter Trump’s tariffs on Sunday. However, she made extensive remarks about the situation on Tuesday, as translated by CNBC.
“No one wins with this decision. On the contrary, it affects the people we represent,” Sheinbaum stated.
She emphasized the importance of U.S.-Mexico economic integration, saying, “We should be integrating our economies to strengthen the region amid the economic and commercial growth of other regions.”
Sheinbaum also insisted that diplomatic discussions should continue. “We will keep the dialog going to find solutions with arguments and rationality.”
“I reiterate: It’s time to defend Mexico and its sovereignty,” she concluded.
Commerce Secretary: Tariffs Aimed at Stopping Drug Flow
Commerce Secretary Howard Lutnickstated that the tariffs imposed on Canada and Mexico were not part of a broader trade war but were intended to curb the influx of fentanyl into the U.S.
“The current tariff policy is a drug-related policy. There’s opioids pouring into this country. They’re killing about 75,000 autopsied Americans a year,” Lutnick said in an interview on CNBC’s Squawk Box.
He pointed fingers at China and North American trade partners, saying, “China makes the opioid products, and then Mexico and Canada feed them into America, and that’s got to end. They’ve done a nice job on the border, but they haven’t stopped the flow of fentanyl.”
Lutnick suggested that the tariffs could be lifted if significant progress is made in stopping drug trafficking.
“If they can stop the flow of fentanyl, and they can prove to the president they can stop the flow of fentanyl, then of course the president can remove these tariffs,” he stated.
He also differentiated the current tariffs from those set to take effect on April 2, which he described as a “reset” of trade policy focused on regulating the flow of goods and services. Lutnick acknowledged that consumers may experience short-term price increases but assured that the long-term impact would be different.
Oil Prices Decline Amid Tariff Uncertainty
Oil prices dropped on Tuesday morning as Trump’s tariffs on Canada and Mexico coincided with increased supply from OPEC+, dampening the crude oil outlook.
By 9:20 a.m. ET, U.S. crude oil had declined by 70 cents (1.02%) to $67.67 per barrel, while Brent crude was down $1.02 (1.42%) at $70.60 per barrel.
Trump’s tariffs include a 10% duty on energy imports from Canada, a move that could disrupt crude flows in North America. Many U.S. refiners, especially those in the Midwest, rely heavily on heavy crude imports from Canada.
While the energy tariffs are expected to disrupt supply chains, the broader 25% tariffs on Canada and Mexico—America’s two largest trading partners—could slow economic growth and reduce oil demand.
Shares of refiners Marathon Petroleum, Phillips 66, and Valero fell in premarket trading following the tariff announcement.
Meanwhile, OPEC+ confirmed on Monday that it will gradually return 2.2 million barrels per day to the market starting in April, further affecting supply-and-demand balances.
Target CEO Warns of Produce Price Hikes
Target CEO Brian Cornell cautioned that the 25% tariffs on Mexican imports could result in higher prices for produce as soon as this week.
During an interview on CNBC’s Squawk Box, Cornell explained that Target relies heavily on Mexican imports for certain fruits and vegetables during winter months.
“Those are categories where we’ll try to protect pricing, but the consumer will likely see price increases over the next couple of days,” Cornell said.
He identified strawberries, avocados, and bananas as key products that could be affected.
“We’re going to try and make sure we can do everything we can to protect pricing, but if there’s a 25% tariff, those prices will go up,” he added.