The global trade landscape entered a volatile new phase on March 4, 2025, as the United States implemented sweeping tariffs on imports from Canada, Mexico, and China, triggering immediate retaliatory measures from its trading partners. 

Tariffs are taxes imposed on imported goods, paid by the importer (usually a U.S. company) at the border, which often leads to higher prices for businesses and consumers as the costs are passed down through the supply chain.

The U.S. imposed 25% tariffs on most goods from Canada and Mexico, alongside a 10% surcharge on Canadian energy exports and a 20% duty on Chinese products. In response, Canada unveiled a $155 billion counter-tariff package targeting American goods, while China announced additional levies on key U.S. agricultural exports. These actions have intensified fears of a prolonged global trade war, with significant implications for consumer prices, supply chains, and international relations.

The Trump administration’s decision to impose tariffs on Canada, Mexico, and China represents a revival of protectionist trade policies last seen during Trump’s first term. The 25% tariff on Canadian and Mexican goods, coupled with a 10% levy on Canadian energy products, was justified as a response to drug trafficking and border security concerns. President Trump claimed the measures would penalize Canada and Mexico for their alleged roles in facilitating fentanyl trafficking into the U.S. and incentivize industries like automotive manufacturing to relocate operations domestically.

Reality Check:

Canadian Border:

• U.S. Customs and Border Protection (CBP) seized 43 pounds of fentanyl at the Canadian border in fiscal year 2024, representing 0.2% of total fentanyl seizures nationwide. In the first three months of fiscal 2025, only 10 pounds (0.2%) were intercepted at the northern border.
• Canadian law enforcement agencies and the U.S. Drug Enforcement Administration (DEA) have repeatedly stated that Canada’s role in U.S. fentanyl trafficking is negligible. Most fentanyl in Canada is domestically consumed, with minimal cross-border smuggling.

Mexican Border:

• In contrast, 21,148 pounds of fentanyl (96.6% of total seizures) were intercepted at the U.S.-Mexico border in fiscal 2024. Mexican cartels dominate the production and distribution of fentanyl into the U.S., often using chemical precursors sourced from China.

White House Misstatements:

• The Trump administration falsely claimed fentanyl has “killed tens of millions of Americans,” while actual overdose deaths peaked at 114,000 annually in 2022–2023. Deaths have since declined by 21%, falling below 90,000 in 2024.

For China, the administration raised existing tariffs from 10% to 20%, citing Beijing’s failure to curb the export of fentanyl precursor chemicals. Trump framed the tariffs as a tool to rebalance trade deficits, arguing that previous administrations had neglected this approach due to incompetence or corruption. Notably, the tariffs were implemented despite last-minute negotiations in February 2025, during which Canada and Mexico secured a 30-day delay by pledging to provide the security measures they promised prior to Trump taking office. 

Canada’s response to the U.S. tariffs has been swift and unprecedented. On March 4, 2025, the Canadian government announced immediate 25% tariffs on $30 billion worth of American imports, including orange juice, peanut butter, wine, spirits, beer, coffee, appliances, apparel, footwear, motorcycles, cosmetics, and certain pulp and paper products. A second phase targeting $125 billion in U.S. goods—spanning electric vehicles, steel, aluminum, and agricultural products—will take effect in three weeks unless the U.S. rescinds its measures.

Finance Minister Dominic LeBlanc emphasized that Canada’s tariffs would remain until the U.S. reversed course, while Foreign Affairs Minister Mélanie Joly warned of additional non-tariff responses if necessary.

Prime Minister Justin Trudeau condemned the U.S. tariffs as economically destructive and politically motivated, accusing Trump of seeking to destabilize Canada’s economy to facilitate annexation.

“We will never become the 51st state,” Trudeau stated.

The retaliatory measures have garnered bipartisan support within Canada, with provincial leaders like Ontario Premier Doug Ford proposing countermeasures such as halting electricity exports to U.S. states and banning American alcohol from provincial stores.

China’s retaliation has focused on leveraging its position as a major importer of U.S. agricultural goods. On March 3, Beijing announced tariffs of 10% to 15% on American soybeans, pork, beef, and poultry, effective March 10. By targeting agriculture, Beijing seeks to galvanize opposition to the tariffs among U.S. farmers and lawmakers, a tactic employed during the 2018–2019 trade war.

Illinois Farm Bureau President Brian Duncan commented today on new tariffs imposed on the United States’ top three agricultural trading partners Mexico, Canada and China, respectively.

“Illinois Farm Bureau urges President Trump to honor the USMCA, which was successfully negotiated during his last term, and to find other methods to combat illegal drugs and secure our border. We remain deeply concerned with the use of tariffs and their potential to spark retaliation on America’s farmers. Illinois farmers’ products – from grains and feed, corn, soybeans, ethanol, beef, pork, and more – rely on access to foreign markets and will undoubtedly be impacted by these new tariffs either through increased prices or decreased market access. This uncertainty coupled with an already struggling farm economy has farmers worried as we head into planting season.”

Illinois is the third largest exporter of agricultural commodities in the U.S. Total exports from Illinois in 2023 were estimated at $81 billion, of which $13.7 billion was attributed to agriculture.

Additionally, China expanded restrictions on U.S. technology firms, launching an antitrust investigation into Google and limiting exports of rare earth minerals used in semiconductor production.

The Chinese government has framed its response as a defense against U.S. “economic coercion,” vowing to challenge the tariffs through the World Trade Organization (WTO). 

The reciprocal tariffs have immediate and far-reaching economic consequences. In the U.S., consumers face higher prices for automobiles, energy, and groceries. The automotive sector, which relies on integrated North American supply chains, is particularly vulnerable. A 25% tariff on Canadian auto parts could raise production costs for U.S. manufacturers by up to $3,000 per vehicle, potentially reducing annual sales by 10%–15%.

Energy markets are also disrupted, as Canada supplies 80% of U.S. crude oil imports. The 10% tariff on Canadian energy exports could increase Midwest gasoline prices by $0.50 per gallon, straining household budgets.

For Canada, the tariffs threaten critical industries such as energy and manufacturing. Alberta’s oil sector, which exports 80% of its production to the U.S., risks losing $12 billion annually if the 10% surcharge remains. Ontario’s automotive industry, responsible for 125,000 jobs, faces potential layoffs as cross-border part shipments incur repeated tariffs. Canadian officials estimate that prolonged trade tensions could jeopardize up to 1 million jobs nationwide.

China’s economy, while less trade-dependent than in previous decades, still faces risks. The 20% U.S. tariff on Chinese goods could reduce exports by $50 billion annually, affecting electronics, textiles, and machinery sectors. However, Beijing’s focus on agricultural retaliation and domestic stimulus measures may cushion the blow, with analysts projecting a modest 0.5% reduction in GDP growth.

Mexican President Claudia Sheinbaum denounced the U.S. measures as “defamatory” and announced retaliatory tariffs on $20 billion worth of American goods, including agricultural and manufactured products. The EU and India have signaled readiness to respond if Trump expands tariffs to their exports, raising the specter of a global trade conflict.