Canada and Mexico hit back with tariffs as US trade war escalates

Canada will hit back at US tariffs with 25% levies of its own on select American goods, Prime Minister Justin Trudeau said Saturday, February 1.

“Canada will be responding to the US trade action with 25% tariffs against CA$155 billion (US$106 billion) worth of American goods,” he said in a dramatic tone as he warned of a fracture in longstanding Canada-US ties.

The first round of tariffs would target CA$30 billion worth of US goods on Tuesday followed by further tariffs on CA$125 billion worth of products in three weeks.

“We’re certainly not looking to escalate. But we will stand up for Canada, for Canadians, for Canadian jobs,” Trudeau said.

The tariffs will apply to “everyday items” such as American beer, wine and bourbon as well as fruits, vegetables, consumer appliances, lumber and plastics, he added – “with much, much more.”

US President Donald Trump earlier announced broad tariffs on Canada, Mexico and China, citing a threat from illegal immigration and drugs.

Canadian exports to the United States will face a 25% tariff starting Tuesday, although energy resources from Canada will have a lower 10% levy.

Trudeau said the trade conflict will have “real consequences” for Canadians but also for Americans, including job losses, higher costs for food and gasoline, potential shutdowns of auto assembly plants, and impeded access to Canadian nickel, potash, uranium, steel and aluminum.

‘Split us apart’

He offered a reminder that Canada has been at the US’s side in its “darkest hours” from the Iran hostage crisis and war in Afghanistan, to deadly natural disasters such as Hurricane Katrina and the recent California wildfires.

“We’re always there, standing with you,” Trudeau said. “If President Trump wants to usher in a new golden age for the United States, the better path is to partner with Canada, not to punish us.” “Unfortunately, the actions taken today by the White House split us apart instead of bringing us together.”

Earlier, Trudeau consulted with provincial premiers, who each said afterward that they would take additional measures such as taking US booze off local store shelves and seeking to immediately diversify their trade relationships.

Alberta Premier Danielle Smith called the US tariffs a “mutually destructive policy” that will “strain the important relationship and alliance between our two nations.”

British Columbia Premier David Eby went further in calling the US tariffs “a complete betrayal of the historic bond between our countries.”

“It’s a declaration of economic war against a trusted ally and friend,” he said, warning that damage to the relationship will be lasting. “We will never again allow ourselves to be beholden to the whims of one person in the White House,” he said.

Meanwhile, at an NHL hockey game between the Ottawa Senators and Minnesota Wild, in Ottawa, a sold out crowd booed the singing of the US national anthem at the start of play.

‘Categorically reject the slander’

South of the US border, Mexican President Claudia Sheinbaum angrily rejected an accusation by US President Donald Trump’s administration Saturday that her government has an alliance with drug cartels, and vowed to retaliate against his sweeping tariffs.

Tensions between the closely connected neighbors soared after the White House said Trump would slap 25% tariffs on Mexican as well as Canadian goods because of illegal immigration and drug smuggling.

Sheinbaum said she had told her economy minister “to implement Plan B that we have been working on, which includes tariff and non-tariff measures in defense of Mexico’s interests.”

She hit back at Washington’s accusation that her government has an “intolerable alliance” with drug trafficking groups.

“We categorically reject the slander made by the White House against the Mexican government about alliances with criminal organizations,” Sheinbaum wrote on social media platform X. “If there is such an alliance anywhere, it is in the US gun shops that sell high-powered weapons to these criminal groups,” she added.

“If the United States government and its agencies wanted to address the serious consumption of fentanyl in their country, they can combat the sale of narcotics on the streets of their main cities, which they don’t do, and the money laundering generated by this illegal activity that has done so much harm to their population,” Sheinbaum added.

Analysts said the tariffs imposed by Mexico’s biggest trade partner would deal a heavy blow to Latin America’s second-largest economy.

The United States bought more than 80% of Mexico’s exports last year, according to official figures.

“Since exports to the US account for around 20% of their GDP, today’s tariffs could plunge both the Canadian and Mexican economies into recession later this year,” the Capital Economics consultancy firm wrote in a note to clients.

An across-the-board tariff of 25% could lead to a drop in Mexican exports of around 12%, according to Gabriela Siller, head of economic analysis for the financial group Banco BASE.

Mexico’s gross domestic product “could fall by four percent in 2025, if the tariff remains in place all year,” she warned.

“By the end of 2024, Mexico was on the verge of a recession. If this tariff lasts for several months, the Mexican economy will fall into a severe recession,” Siller added.

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