US President Donald Trump has signed an order to impose stiff tariffs on imports from Mexico, Canada and China, fulfilling a campaign promise but raising the prospect of increased prices for American consumers.
Mr Trump is declaring an economic emergency to put duties of 10 per cent on all imports from China and 25 per cent on imports from Mexico and Canada — America's largest trading partners — except for a 10 per cent rate on Canadian energy.
All tariffs are being imposed under the authority of the International Emergency Economic Powers Act.
The White House said Trump's order also includes a mechanism to escalate the rates if the countries retaliate against the US, as they have threatened.
Mexico and Canada have now responded, imposing their own tariffs on the US.
Canadian Prime Minister Justin Trudeau announced retaliatory 25 per cent tariffs on US goods.
"We didn't ask for this but we will not back down," he said.
Meanwhile, China will file a legal case against the United States at the World Trade Organization. It has not imposed its own tariffs.
Here's what we know.
Why is Trump imposing tariffs?
Mr Trump says the tariffs are to force the countries to do more to stop the flow of fentanyl entering the US.
It also includes pressuring Canada and Mexico to limit any illegal immigration into the country.
A White House fact sheet on the duties said the tariffs would remain in place "until the crisis alleviated," but it did not provide details on what actions the three countries would need to take to win a reprieve.
Posting on his Truth Social account, Mr Trump cited undocumented migration and the flow of drugs as the reason behind the tariffs.
"We need to protect Americans, and it is my duty as president to ensure the safety of all," he wrote.
"I made a promise on my campaign to stop the flood of illegal aliens and drugs from pouring across our borders, and Americans overwhelmingly voted in favour of it."
Mr Trump has previously said tariffs would create more factory jobs, shrink the federal deficit, lower food prices and allow the government to subsidise childcare.
"Tariffs are the greatest thing ever invented," Mr Trump said at a rally during his presidential campaign.
When will the tariffs come into effect?
The tariffs are scheduled to go into place on Tuesday, February 4.
Imports that were loaded onto a vessel or onto their final mode of transit before entering the US prior to 12:01am Saturday (local time) would be exempt from the duties.
Canada prepared to 'fight'
Mr Trudeau has announced Canada will retaliate by placing duties of 25 per cent on imports from the US.
He lamented Mr Trump's decision, saying it would drive the two countries apart after years of close cooperation.
"Tonight, I am announcing Canada will be responding to the US trade action with 25 per cent tariffs against $C155 billion worth of American goods," Mr Trudeau said.
"This will include immediate tariffs on $C30 billion worth of goods as of Tuesday, followed by further tariffs on $C125 billion worth of American products in 21 days time to allow Canadian companies and supply chains to seek to find alternatives."
The Canadian leader said tariffs would include American beer, wine and bourbon, as well as fruits and fruit juices.
Canada will also target goods such as clothing, sports equipment and household appliances.
Mr Trudeau said non-tariff measures were also being considered, potentially relating to critical minerals, energy procurement and other partnerships.
He called on Canadians to choose Canadian goods, and to forgo Florida orange juice, Kentucky bourbon, and holidays in the US.
Canada's energy and natural resources minister, Jonathan Wilkinson, said in a post on X that he seeks to reassure Canadians following the move by Mr Trump.
"Canada has done nothing to provoke tariffs," Mr Wilkinson wrote.
"But I want to reassure each and every Canadian: no matter who you are or where you live, we are prepared and ready to fight for you. We will always be your champions."
Ontario Premier Doug Ford has said: "Canada has no choice but to hit back and hit back hard."
The Canadian Chamber of Commerce said Mr Trump's decision was "profoundly disturbing".
"The tariffs will have immediate and direct consequences on Canadian and American livelihoods. Tariffs will drastically increase the cost of everything for everyone."
Mexico orders retaliatory tariffs
Mexico's President Claudia Sheinbaum has rejected Washington's suggestions that her government is collaborating with criminal organisations, calling on the US to curb demand for drugs internally.
In a lengthy post on X, she wrote that she had ordered her economy minister to implement tariff and non-tariff measures to defend Mexico's interests.
"If the United States government and its agencies wanted to address the serious fentanyl consumption in their country, they could fight the sale of drugs on the streets of their major cities, which they don't do and the laundering of money that this illegal activity generates that has done so much harm to its population."
It is not exactly clear what the retaliatory tariffs involve.
But according to sources familiar with the matter, Mexico has been preparing possible retaliatory tariffs against imports from the US ranging from 5 per cent to 20 per cent on pork, cheese, and fresh produce, as well as manufactured steel and aluminium.
Ms Sheinbaum also stressed her government does not seek confrontation with its northern neighbour, but collaboration and dialogue.
China to challenge tariffs under WTO
China will challenge US tariffs through the World Trade Organization (WTO), the Chinese commerce ministry said.
The imposition of tariffs by the US "seriously violates" WTO rules, the ministry said in a statement.
It is urging the US to "engage in frank dialogue and strengthen cooperation".
What has the other reaction been?
Chet Thompson, CEO of the American Fuel and Petrochemical Manufacturers, said American refiners rely on crude oil from Canada and Mexico to produce the "affordable, reliable fuels consumers count on every day".
"We are hopeful a resolution can be quickly reached with our North American neighbours so that crude oil, refined products and petrochemicals are removed from the tariff schedule before consumers feel the impact."
The US Chamber of Commerce slammed the tariffs, warning they will raise consumer prices.
In a statement, the group acknowledged that while Mr Trump was right to focus on securing the border and fighting the illicit flow of fentanyl, these tariffs would not solve the issues.
"The imposition of tariffs under IEEPA is unprecedented, won't solve these problems, and will only raise prices for American families and up-end supply chains," said John Murphy, senior vice president and head of international at the chamber.
What are tariffs?
A tariff is a tax on imports or foreign goods.
Tariffs are typically charged as a percentage of the price a buyer pays a foreign seller.
In the US, tariffs are collected by Customs and Border Protection agents at 328 ports of entry across the country.
Altogether, the US imported $1.2 trillion worth of goods from Canada, Mexico and China combined in 2023.
Canada is a major exporter of crude oil, while Mexico exports many fresh fruits and vegetables.
Mexico is also the largest auto parts exporter to the US. China is a major exporter of chips used in electronics like phones and laptops.
Mainstream economists are generally sceptical of tariffs, considering them a mostly inefficient way for governments to raise money and promote prosperity.
Who actually pays?
Mr Trump insists that tariffs are paid for by foreign countries.
But in fact, it is importers — American companies — that pay tariffs, and the money goes to the US Treasury.
Those companies, in turn, typically pass their higher costs on to their customers in the form of higher prices. That's why economists say consumers usually end up footing the bill for tariffs.
If the tariffs imposed by Mr Trump are sustained, they could cause inflation to significantly worsen, possibly eroding voters' trust that the president could, as promised, lower the prices of groceries, gasoline, housing, autos and other goods.
Still, tariffs can hurt foreign countries by making their products pricier and harder to sell abroad.
Foreign companies might have to cut prices — and sacrifice profits — to offset the tariffs and try to maintain their market share in the US.
Yang Zhou, an economist at Shanghai's Fudan University, concluded in a study that Mr Trump's tariffs on Chinese goods inflicted more than three times as much damage to the Chinese economy as they did to the US economy.
More tariffs likely to come
These tariffs likely aren't the last to come from the president.
Mr Trump is preparing more import taxes in a sign that tariffs will be an ongoing part of his second term.
On Friday, he mentioned imported computer chips, steel, oil and natural gas, as well as against copper, pharmaceutical drugs and imports from the European Union — moves that could essentially pit the US against much of the global economy.
ABC/AP/Reuters
