President Donald Trump confirmed on Monday that 25% tariffs on imports from Mexico and Canada will take effect on March 4, 2025. Tariffs are taxes imposed by a government on imported goods, and while they are technically paid by the importing businesses at the border, the costs are often passed on to consumers in the form of higher prices for those goods.

The decision, framed by the administration as a response to inadequate border security and drug enforcement, risks upending decades of integrated supply chains, inflating consumer prices, and provoking retaliatory measures from trading partners.

The tariffs stem from three executive orders signed by Trump on February 1, 2025, which impose a 25% ad valorem duty on nearly all imports from Mexico and Canada, with a reduced 10% rate on Canadian energy resources such as crude oil and natural gas.

These tariffs stack atop existing duties and eliminate de minimis exemptions for shipments under $800, subjecting even small e-commerce parcels to the new levies. The administration justified the measures under the International Emergency Economic Powers Act (IEEPA), citing national security threats from drug trafficking and migration.

Canada

President Trump’s claim that Canada has failed the U.S. by allowing large amounts of drugs and people across the border, including illegal immigrants from over 70 different countries, is largely exaggerated and not supported by the available statistics. 

In the fiscal year 2024, U.S. border authorities confiscated 43 pounds of fentanyl at the Canadian border, which accounted for approximately 0.2% of the total pounds seized across all borders. In the first three months of fiscal year 2025, from October through December 2024, there were 10 pounds of fentanyl seized at the Canadian border, maintaining the same percentage of the total 4,537 pounds seized during that period. This data marks a slight increase in fentanyl seizures at the Canadian border over recent years, with totals rising from 2 pounds in fiscal year 2023 to 43 pounds in fiscal year 2024, after recording 14 pounds in fiscal year 2022.

While there has been a notable increase in illegal crossings from Canada, the numbers remain relatively small compared to those at the southern border. In fiscal year 2024, U.S. authorities recorded 198,929 encounters with migrants at the Canadian border. This represents a significant uptick from previous years, yet it is still considerably lower than the millions of encounters recorded annually at the southern border. Specifically, the Swanton Sector—which covers parts of New York, Vermont, and New Hampshire—saw about 19,000 arrests in fiscal year 2024, a substantial increase from around 7,000 in fiscal year 2023.

Canada has implemented several measures to address concerns about illegal border crossings. The Canadian government has enhanced its border surveillance capabilities by deploying drones, canine units, and helicopters. These steps have proven effective, as evidenced by an 89% drop in illegal crossings by foreign nationals from the U.S. between June and December 2024.

Mexico

Historically, around 90% of the illicit fentanyl in the United States traced back to China, either shipped directly or via Mexico. A significant change occurred in 2019 when China regulated fentanyl as a controlled substance. This led to a shift in production to Mexico, where precursor chemicals supplied by Chinese companies are used by cartels like the Sinaloa Cartel and the Jalisco New Generation Cartel (CJNG). These groups have established a robust system to synthesize fentanyl in clandestine labs and smuggle it into the U.S. via key corridors.

President Biden issued a National Security Memorandum calling for increased intelligence collection and coordination across federal agencies to disrupt fentanyl production and distribution. The plan focused on several measures that eventually led to reduced rates of the drug making it into the United States. 

The Biden administration implemented several measures to enhance fentanyl detection:

1. Non-Intrusive Inspection (NII) Technology: CBP (Customs and Border Protection) is dramatically expanded NII technology at southwest border ports of entry. This allowed for screening of passenger vehicles to increase from 2% to 40%, and cargo vehicles from 17% to 70%.
2. Forward Operating Laboratories: CBP operates 16 Forward Operating Laboratories that provide rapid on-site testing for fentanyl, reducing the process from weeks to seconds.
3. Artificial Intelligence: Machine learning models are used to help CBP officers determine which suspicious vehicles and passengers to refer for secondary screening.
4. Advanced Analytics: The Department of Homeland Security (DHS) developed advanced analytics tools to map and dismantle domestic and international fentanyl networks.

This led to the largest seizures of fentanyl at the southern border in American history. 

Overdose deaths, specifically those from synthetic opioids like fentanyl, had been climbing steadily since the 1990s and continued to rise during Trump’s administration. 

During the first Trump administration (2017-2021), fentanyl-related statistics showed a significant increase in both seizures and overdose deaths. When Trump took office in January 2017, the number of overdose deaths related to synthetic opioids (including fentanyl) was about 21,000. By January 2021, when he left office, that number had increased to nearly 60,000.

This trend had begun before Trump took office and continued after he left. 

In 2022, fentanyl was responsible for 73,654 deaths in the US, which was more than double the number of deaths from 2019. Fentanyl was involved in over half of all drug overdose deaths since 2019, and by 2022, it was the underlying cause of nearly 70% of drug overdose deaths.

In the second half of 2023, opioid overdose deaths, including those from fentanyl, started to decline. By December 2023, opioid deaths were 20% fewer than in December 2022. Overdose deaths involving opioids decreased from an estimated 84,181 in 2022 to 81,083 in 2023. The most recent data shows a substantial decline in overdose deaths. Between July 2023 and July 2024, drug overdose deaths in the United States fell by 17%. This 17% decrease is the largest ever seen in the United States.

This reduction in deaths came from an ongoing focus of reducing the amount of fentanyl that made it into the United States. 

From 2013-2017 fentanyl seizures were low. In 2018, CBP seized 745 kilograms of fentanyl. By 2019, seizures jumped to 1,208 kilograms, representing a 62% increase from the previous year. By mid-year 2020, CBP had already seized 1,208 kilograms of fentanyl, matching the total for all of 2019.

In 2023, DEA seized nationally more than 77 million fentanyl pills and nearly 12,000 pounds of fentanyl powder, which amounts to more than 386 million deadly doses of fentanyl prevented from reaching consumers.

About 21,148 pounds of fentanyl were seized at the Mexican border in fiscal year 2024, accounting for roughly 96.6% of the total. The amount seized at the southern border in FY 2024 was down from 26,718 pounds in FY 2023. 

There was a significant increase in fentanyl seizures under the Biden administration. In the first five months of FY 2024 alone, over 13,000 pounds of illicit fentanyl were seized by U.S. 

Customs and Border Protection (CBP) and Homeland Security Investigations (HSI). CBP has seized more fentanyl in the last two fiscal years than in the previous five fiscal years combined. 

While the border agents did their job, collecting thousands of pounds of fentanyl at the border, it is difficult to estimate how much fentanyl actually came into the United States from the southern border. Statistics suggest, though, that about 90% of fentanyl is confiscated at the border. 

2025 Tariffs

Trump reiterated his stance on March 3, declaring, “There is no room left for negotiations” after accusing Mexico and Canada of insufficient progress in curbing fentanyl smuggling.

Market Reactions and Consumer Impact

U.S. stock indices plummeted following the announcement, with the S&P 500 and Nasdaq Composite dropping 2.6% and 3.1%, respectively, as trade-sensitive sectors absorbed losses. Energy stocks bore the brunt, reflecting concerns over disrupted crude oil imports, which account for 70% of U.S. supplies from Canada and Mexico. Retailers reliant on North American supply chains, including Dollar Tree and Abercrombie & Fitch, saw shares decline 5.6% and 6%, respectively.

Economists warn that the tariffs will inflate prices for goods ranging from automobiles to produce. Mexico supplies over $3 billion annually in fresh fruits and vegetables to the U.S., while Canada remains a critical source of automotive components. Analysts project average vehicle prices could rise by $2,700 to $10,000 due to cascading tariffs on cross-border parts shipments.

Produce Prices

• Prices for fruits and vegetables are projected to increase by 15-25% due to the 25% tariffs on imports from Mexico and Canada.
• Roughly 90% of avocados consumed in the U.S. come from Mexico, along with significant portions of tomatoes, cucumbers, bell peppers, jalapeños, limes and mangos.
• The tariffs may reduce product variety and availability, as the U.S. lacks year-round growing conditions for certain produce.

Automobile Costs

• Car prices could rise by $4,000 to $12,200 depending on the vehicle type.
• Electric vehicles may see the highest increases, up to $12,200 per vehicle.
• Full-size SUVs could see price hikes of around $9,000, pickup trucks $8,000, and small cars $6,200.

Housing Costs

• Construction material costs are projected to increase by 4-6% over the next 12 months.
• Lumber costs could spike by 40% due to existing duties plus the new tariffs.
• Other key materials facing price increases include:
  • Steel: 10-25%
  • Copper: 8-15%
  • Aluminum: 5-12%
  • Concrete: 3-7%
  • Drywall: 4-8%
  • Roofing materials: 7-12%
• These increased costs are likely to be passed on to homebuyers, potentially worsening the housing affordability crisis

USMCA

The USMCA (United States–Mexico–Canada Agreement), which was designed by and signed by Trump as an updated NAFTA Agreement during his first term went into effect on July 1, 2020. This agreement was designed to create a more balanced trade environment in North America. USMCA focused on mutual benefits and cooperation, while the 2025 tariffs are unilateral and punitive.

According to the U.S. Chamber of Commerce, the USMCA:

1. Supports Millions of Jobs

Trade with Canada and Mexico under the USMCA supports approximately 12 million American jobs. Moreover, 49 U.S. states count Canada or Mexico as one of their top three merchandise export markets, showcasing the agreement’s importance to local economies across the country.

2. Drives Export Growth

Since the 2007 recession, U.S. exports to Canada and Mexico have grown more than exports to any other countries. Together, these two nations account for 40% of the growth in overall U.S. goods exports. In 2018 alone, trade with Canada and Mexico reached nearly $1.4 trillion.

3. Vital for U.S. Manufacturers

The agreement is critical for U.S. manufacturing sectors, supporting over 2 million American jobs tied to exports of manufactured goods to Canada and Mexico. Many states rely on these nations as their largest foreign purchasers of goods.

4. Essential for Farmers and Ranchers

USMCA has been transformative for American agriculture, with exports to Canada and Mexico quadrupling from $8.9 billion in 1993 to $39 billion in 2017. Nearly one-third of all U.S. agricultural exports go to these neighboring countries.

5. Boosts Small Businesses

Canada and Mexico are the top two export destinations for U.S. small and medium-sized enterprises (SMEs). More than 120,000 American SMEs sell their goods and services to these markets, benefiting from reduced trade barriers under USMCA.

6. Powers the Service Economy

U.S. services exports to Canada and Mexico have tripled since 1993, growing from $27 billion to $96 billion by 2018. This growth has bolstered America’s competitive business services sector, including industries such as software development, architecture, engineering, insurance, banking, and project management.