U.S. President Donald J. Trump wants to bring Mexico and Canada to the negotiating table, but consumers will pay the price through a rise in food costs, as well as in other categories.
Trump said Thursday he’s planning to impose tariffs as soon as Saturday, although by how much and for how long wasn’t disclosed. Those details could be disclosed on Friday. The top number that’s been bandied is 25 percent, but the only thing that’s certain is that tariffs are forthcoming.
The U.S. president has made clear that an immediate priority is closing the borders. He’s using tariffs as a way to stop the entry of undocumented individuals from entering the U.S. He also wants to the flow of illegal drugs into the country, namely fentanyl. But imposing tariffs now could also be a form of leverage to restructure the U.S.-Mexico-Canada Agreement (USMCA) that Trump negotiated the last time he was in office five years ago. The USMCA replaced the North America Free Trade Agreement, and is up for joint review on July 1, 2026.
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A Goldman Sachs report from chief political economist Alex Phillips said that a sustained 25 percent across-the-board tariff on Canada and Mexico is unlikely. He also cited comments made on Wednesday in the Senate Commerce Committee by Commerce Secretary nominee Howard Lutnick: “The short-term issue is illegal immigration and worse even still, fentanyl…so, this tariff model is simply to shut their borders…to create action from Mexico and action from Canada, and as far as I know, they are acting swiftly and if they execute it there will be no tariff, and if they don’t, there will be.”
Phillips listed possible scenarios that stop short of an immediate 25 percent tariff on all imports from each country. There could be an imposed tariff that doesn’t begin until a few weeks later, a repeat of the steel/aluminum tariffs during the early rounds of China-focused tariffs in 2018. This would leave time to negotiate concessions from Canada and Mexico. Trump also used this tactic in 2019 on imports from Mexico, but later rescinded it before implementation after an agreement with Mexico on immigration-related policies, Phillips noted.
Another option would be a targeted tariff of 25 percent on certain goods. The other scenario that’s been floated is the start of tariffs at a lower rate that gradually rises to 25 percent using a phased-in approach, one that supposedly is favored by Treasury Secretary Scott Bessent.
According to S&P Global Ratings, the sectors most vulnerable to tariff shock in Mexico are the auto and electrical equipment sectors, while commodity-related processing sectors—paper products, rubber, and plastics—have the largest exposure in Canada. Corrugate materials— pulp, recycled fiber and adhesives—specifically cardboard boxes, are in high demand in e-commerce, and tariffs on pulp and other inputs could create supply constraints.
Canada is expected to impose tariffs of its own in retaliation, likely as high as 25 percent, while Mexico is expected to imposed a 25 percent tariff on imports of American agriculture and fishing, and food products, the S&P report noted.
Current imports where American consumers could see price increases range from gasoline to autos and food products, such as avocados from Mexico. Retaliatory tariffs would hurt American imports of items such as furniture and steel products, while the premier of the Canadian province Ontario has threatened to pull U.S. distilled spirits from stores.
