Donald Trump’s latest tariff deadline arrives tonight with potential new duties starting as soon as tomorrow on America’s top three trading partners: Canada, China, and Mexico.
It’s a threat that Trump has partially delayed once before but if he follows through on even a sliver of his many upcoming promises, it could match or surpass the economic toll of his entire first term.
There is “no room left for Canada or for Mexico,” Trump reiterated Monday afternoon at the White House, saying he wouldn’t pare back his tariffs levels on those two countries.
The president is planning 25% duties on Canadian and Mexican imports tonight following a 30-day pause. He has also has a second round of 10% duties on Chinese imports planned to increase the blanket tariffs on that nation to 20%.
The Tax Foundation estimates that Trump’s 2018-2019 tariffs shrank US GDP by about 0.2%. The proposed tariffs this week against just Canada and Mexico are projected to surpass that, the group said, even setting aside all-but-certain retaliation and Trump’s moves against China.
President Donald Trump takes questions from reporters on the South Lawn of the White House on Feb. 28. (Andrew Harnik/Getty Images) ·Andrew Harnik via Getty Images
The back and forth from the White House came after a day of meetings among Trump and his economic team.
US stocks plummeted on Monday afternoon as investors assessed the economic impact of the Trump administration’s tariff plans. The administration’s approach to the economy appears to be weighing down both the investing and consumer outlook in the United States.
“The economy appears to be gagging on the uncertainty created by the haphazard economic policymaking happening in DC,” Moody’s Analytics chief economist Mark Zandi said in a recent post. He listed a range of factors, including “tariff wars, DOGE cuts to jobs and government programs and agencies, and deportations [that] are sowing confusion, which puts a pall on investment, hiring and spending.”
The potential economic costs were also underlined Monday, with the Institute for Supply Management’s PMI Manufacturing report for February coming in below expectations on tariff uncertainty.
Committee chair Tim Fiore then told Yahoo Finance Monday “I really quiver to think of what would happen if the Mexico and Canada tariffs go into place in the next couple of days and what that would mean for the PMI for March.”
Read more: What are tariffs, and how do they affect you?
Still, Trump has repeatedly insisted that tariffs “will indeed go into effect” even as Trump and his aides tout dramatic drops in border crossings — the other major stated rationale for this week’s move — but with Trump claiming those changes are “mostly due to us.”
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Underlying the trade tensions is a market recognition that Trump following through on even a small portion of his promises will have wide-ranging effects.
The Tax Foundation calls Trump’s 2018-2019 tariffs “one of the largest tax increases in decades” — and those duties were largely focused on China.
Those moves, the group estimates, reduced the long-run US GDP by 0.2% and lowered employment by the equivalent of 142,000 full-time jobs.
Trump’s promises are much more wide-ranging this time. He has already followed through on one China-specific pledge: slapping 10% duties on Chinese goods in early February over the drugs and migration issues.
Those duties alone, the Tax Foundation estimates, are set to shrink the US economy by about 0.1% if left in place.
But even if Trump eventually pushes this week’s deadline, another looms close behind with 25% tariffs on steel and aluminum set to take effect on March 12.
A recent Goldman Sachs (GS) research paper on the issue noted that if Trump drops this week’s threat and follows through on that second threat — and then does nothing else but keep the tariffs in place — it would be “roughly equivalent to all of the tariff hikes from the first Trump administration.”
And plenty more is still possible. Trump has launched Commerce Department investigations into products such as semiconductors, copper, automobiles, and pharmaceuticals for potential new duties.
In recent days, Trump added timber to the list, with a new investigation set to get underway there. He also posted Monday that new duties would be coming on external agriculture products in April, telling US farmers to sell more of their crops inside the United States and “Have Fun!”
Trump has also recently promised 25% duties on the European Union without specifying exactly when those might come into force.
And then waiting next month is what Commerce Secretary Howard Lutnick calls “the big transaction”: reciprocal tariffs that could begin to be implemented on a wide array of nations and goods themselves starting on April 2.
All told, charged former Trump communications director turned outspoken critic Anthony Scaramucci to Yahoo Finance this week, “I don’t think this sort of blanket approach is the right way to do it, and I think he’s [Trump] is going to put us into a recession.”
This week’s deadline comes after Trump agreed to the pause last month following talks with Mexican President Claudia Sheinbaum and Canadian Prime Minister Justin Trudeau.
But Trump and his aides have promised that no more delays are in the offing, and all three targeted nations have also signaled detailed plans to implement wide-ranging and creative retaliations in case Trump follows through.
Canada could potentially target key sectors in GOP-run states like Florida orange juice or Kentucky bourbon, and China is set to further target the agriculture sector. Mexican President Claudia Sheinbaum told reporters on Monday that her nation was ready for whatever Trump decides saying “we have a plan B, C, D,”
As for the duties themselves, Lutnick said previously said that tariffs are set to go into place but that the levels could change in what he called “a fluid situation.”
“There are going to be tariffs on Tuesday on Mexico and Canada,” Lutnick said Sunday on Fox News. “Exactly what they are, we’re going to leave that for the president and his team to negotiate.”
Lutnick was announced by Trump as the leader of his administration’s trade and tariff efforts, but the weekend comments are reflective that the authority Trump is set to rely on this week is largely a unilateral one.
The duties would be enforced using a 1977 law called the International Emergency Economic Powers Act, which endows the president with wide-ranging authority to act without even the minimal delays of things like a Commerce Department review.
This post has been updated with additional developments.
Ben Werschkul is Washington correspondent for Yahoo Finance.
Every Friday, Yahoo Finance’s Rick Newman and Ben Werschkul bring you a unique look at how U.S. policy and government affects your bottom line on Capitol Gains. Watch or listen to Capitol Gains on Apple Podcasts, Spotify, or wherever you find your favorite podcasts.
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