The Trump administration’s 25 percent tariffs on all goods imported from Canada and Mexico (except Canadian energy, tariffed at 10 percent) went into effect at 12:01 a.m. ET on Tuesday, March 4th. Additionally, a tariff on Chinese goods increased from 10 percent to 20 percent.
“What they’ll have to do is build their car plants, frankly, and other things in the United States, in which case they have no tariffs,” President Trump told the press on Monday.
In an interview over the weekend, U.S. Commerce Secretary Howard Lutnick implied that Trump could change this week’s tariffs to a different rate. However, the president moved ahead with the originally planned 25 percent rate for Canada and Mexico.
Canadian Prime Minister Justin Trudeau responded by imposing 25 percent duties on $30 billion worth of imports from the U.S., and tariffs on another $125 billion in goods, including cars, are scheduled to go into effect in 21 days. A significant portion of new cars sold in Canada are imported from the U.S. – approximately half, according to some estimates – so this would likely have a major impact on the cost of cars in Canada.
GM CAMI Assembly Plant in Canada
Mexican President Claudia Sheinbaum plans to unveil a retaliatory tariff package on March 9th.
According to estimates from S&P Global Mobility, approximately 15 percent of new cars sold in the U.S. in 2024 were imported from Mexico, a little under seven percent were imported from Canada, and about 54 percent were assembled in the U.S. While U.S.-built cars may seem tariff-proof, analysts have predicted increased costs of building cars in the States because of pricier imported parts.
Ostensibly, the reason for the new tariffs on Canada and Mexico is a response to what the Trump administration sees as inadequate action from its North American neighbors on reducing the flow of illegal immigrants and fentanyl into the U.S. Another motive for the tariffs is increasing the federal revenue. The Yale Budget Lab estimates that the new tariffs will raise $1.4-1.5 trillion in revenue for the U.S. government over the next decade if sustained.
