Trump imposes steep tariffs on Canada, Mexico, and China. Will it sabotage economic growth?

President Donald Trump on Saturday signed an order to impose stiff tariffs on imports from Mexico, Canada and China — fulfilling one of his post-campaign commitments to voters that also carries the risk of sparking higher inflation and disrupting businesses across North America.

Mr. Trump declared an economic emergency in order to place duties of 10% on all imports from China and 25% on imports from Mexico and Canada — America’s largest trading partners — except for a 10% rate on Canadian energy, including oil, natural gas and electricity. The tariffs would go into effect on Tuesday, setting a showdown in North America that could potentially sabotage economic growth.

A senior administration official, insisting on anonymity to brief reporters, said the lower rate on energy reflected a desire to minimize any disruptive increases on the price of gasoline or utilities. That's a sign the White House understood as outside economists have warned that the import taxes if sustained could dramatically increase inflation, a possible problem for Mr. Trump as he promised to tame inflation after public unhappiness with price spikes under former President Joe Biden.

The order signed by Mr. Trump contained no mechanism for granting exceptions, the official said, a possible blow to homebuilders who rely on Canadian lumber as well as farmers, automakers and other industries.

The White House said Mr. Trump’s order also includes a mechanism to escalate the rates if the countries retaliate against the U.S., as they have threatened. Both Canada and Mexico have plans, if needed, to impose their own tariffs in response.

The Mr. Trump administration put the tariffs in place to force the three countries to stop the spread and manufacturing of fentanyl, in addition to pressuring Canada and Mexico to limit any illegal immigration into the United States.

The official did not provide specific benchmarks that could be met to lift the new tariffs, saying only that the best measure would be fewer Americans dying from fentanyl addition.

The order would also allow for tariffs on Canadian imports of less than $800. Imports below that sum are currently able to cross into the United States without customs and duties.

The Republican president is making a major political bet that his actions will not worsen inflation, cause financial aftershocks that could destabilize the worldwide economy or provoke a voter backlash. AP VoteCast, an extensive survey of the electorate in last year's election, found that the U.S. was split on support for tariffs.

With the tariffs, Mr. Trump is honoring promises that are at the core of his economic and national security philosophy. But the announcement showed his seriousness around the issue as some Trump allies had played down the threat of higher import taxes as mere negotiating tactics.

The president is preparing more import taxes in a sign that tariffs will be an ongoing part of his second term. On Friday, he mentioned imported computer chips, steel, oil and natural gas, as well as against copper, pharmaceutical drugs and imports from the European Union — moves that could essentially pit the U.S. against much of the global economy.

It is unclear how the tariffs could affect the business investments that Mr. Trump said would happen because of his plans to cut corporate tax rates and remove regulations. Tariffs tend to raise prices for consumers and businesses by making it more expensive to bring in foreign goods.

Many voters turned to Mr. Trump in the November election on the belief that he could better handle the inflation that spiked under Democratic President Joe Biden. But inflation expectations are creeping upward in the University of Michigan's index of consumer sentiment as respondents expect prices to rise by 3.3%. That would be higher than the actual 2.9% annual inflation rate in December's consumer price index.

Mr. Trump has said that the government should raise more of its revenues from tariffs, as it did before the income tax became part of the Constitution in 1913. He claims, despite economic evidence to the contrary, that the U.S. was at its wealthiest in the 1890s under President William McKinley.

“We were the richest country in the world,” Mr. Trump said Friday. “We were a tariff country.”

Brad Setser, a senior fellow at the Council on Foreign Relations, noted on the social media site X that the tariffs “if sustained, would be a massive shock — a much bigger move in one weekend than all the trade action that Mr. Trump took in his first term.”

Mr. Setser noted that the tariffs on China without exemptions could raise the price of iPhones, which would test just how much power corporate America has with Mr. Trump. Apple’s CEO Tim Cook attended Trump’s inauguration last month.

Recent research on Mr. Trump’s various tariff options by a team of economists suggested the trade penalties would be drags on growth in Canada, Mexico, China and the U.S. But Wending Zhang, a Cornell University economist who worked on the research, said the fallout would be felt more in Canada and Mexico because of their reliance on the U.S. market.

Canadian Prime Minister Justin Trudeau told Canadians that they could be facing difficult times ahead, but that Ottawa was prepared to respond with retaliatory tariffs if needed and that the U.S. penalties would be self-sabotaging.

Mr. Trudeau said Canada is addressing Mr. Trump’s calls on border security by implementing a CDN $1.3 billion (US $900 million) border plan that includes helicopters, new canine teams and imaging tools.

Mexico President Claudia Sheinbaum has stressed that her country has acted to reduce illegal border crossings and the illicit trade in fentanyl. While she has emphasized the ongoing dialogue since Mr. Trump first floated the tariffs in November, she has said that Mexico is ready to respond, too.

Mexico has a “Plan A, Plan B, Plan C for what the United States government decides,” she said.

Mr. Trump still has to get a budget, tax cuts and an increase to the government’s legal borrowing authority through Congress. The outcome of his tariff plans could strengthen his hand or weaken it.

Democrats are sponsoring legislation that would strip the president of his ability to impose tariffs without congressional approval. But that is unlikely to make headway in a Republican-controlled House and Senate.

“If this weekend’s tariffs go into effect, they’ll do catastrophic damage to our relationships with our allies and raise costs for working families by hundreds of dollars a year,” said Sen. Chris Coons, a Democrat from Delaware. “Congress needs to stop this from happening again.”

This story was reported by The Associated Press.