The drama of President Donald Trump’s long-promised tariffs opened in the first weekend of February, with dizzying twists, turns and reversals.
It began when Trump announced at a Jan. 31 press conference that he was ready to impose additional tariffs of 10% on all imports from China (on top of already-existing tariffs) as well as on energy imports from Canada, along with 25% tariffs on all other imports from Mexico and Canada. On Feb. 2, Trump warned Americans, in an all-caps post on his Truth Social site, that there could be “some pain” from his tariffs. The tariffs, originally set to take effect Feb. 4. brought pushback from a wide variety of business, farm and union interests.
But on Feb. 3, Trump announced in another Truth Social post that the threatened tariffs on Mexican products would be paused for a month after talks he had with Mexican president Claudia Sheinbaum. Later he did the same with the Canada tariffs after claiming to have extracted border concessions from both countries.
Trump’s often-stated goal is to persuade both countries to do more to stop fentanyl and human smuggling into the United States, but he has also referenced trade imbalances when speaking about tariffs. Some commentators speculated the tariff drama was theater, with both Mexico and Canada seeming to give way and to pledge to take steps that were already underway to allow Trump to declare victory.
At press time, Trump was going ahead with the additional 10% tariffs on Chinese products. He has promised further targeted tariffs in mid-February on a range of products, including pharmaceuticals, computer chips, copper, aluminum, iron and steel and oil and gas. He has also promised tariffs on the European Union “soon,” although he didn’t say when those would come or what products would be targeted.
Scope of trade
The U.S. imported about $418.6 billion in goods from Canada in 2023, according to Census Bureau data. Imports of crude oil, natural gas, electricity and other energy-related products accounted for at least $106 billion that year. In 2023, the U.S. imported $475.2 billion in goods from Mexico. China accounted for 13.5% of total U.S. imports in 2023.
Mexico and Canada together account for about 70% of U.S. oil imports. Many American refineries are designed to refine the sour heavy crude produced in both countries, rather than the light, sweet crude produced in the Permian Basin. Retooling a refinery to refine a different type of oil can cost hundreds of millions or even billions of dollars.
The total value of all goods traded between the U.S. and Canada and the U.S. and Mexico is about $1.5 trillion.
The U.S. imported $38.5 billion in agricultural goods from Mexico in 2023, according to U.S. Department of Agriculture data, as well as about $26 billion in alcoholic beverages. A large portion of the fruits and vegetables bought by Americans are grown in Mexico.
Emergency declaration
Congress began delegating its trade and tariff authority to the president in a series of laws beginning in the 1930s. In 1962, the Trade Expansion Act gave President John F. Kennedy tariff authority up to 80%. President Trump cited his authority from the International Economic Emergency Power Act, signed into law in 1977 by President Jimmy Carter.
It was the first time that law had been used to justify tariffs, although President Richard Nixon cited a predecessor of the law to impose 10% tariffs in 1971. Title 50, U.S. Code 1701 of the IEEPA authorizes the president to declare the existence of an “unusual and extraordinary threat… to the national security, foreign policy or economy of the United States” that originates “in whole or substantial part outside the United States.” That law allows for quicker action than other laws whose trade authority Trump might have cited.
Because courts traditionally defer to the president’s use of his delegated trade and tariff authority, some commentators argue that the various laws delegating trade and tariff authority to the president amount to a blank check, despite conditions attached to some of the laws.
Sen. Charles Grassley, R-Iowa, a strong Trump supporter on other issues, has opposed Trump’s tariff agenda since his first term. He has often said he believes that Congress’ delegation of tariff powers to the president violates the Constitution’s separation of powers. Grassley recently told RFD-TV, “The country has turned protectionist and mercantilist, and I don’t think that’s good. But we did have an election [that] decided that the country likes what Trump’s trying to do.”
Farm comments
Illinois Farm Bureau President Brian Duncan wrote, “Illinois Farm Bureau supports a rules-based approach to trade, and our farmers simply cannot afford the uncertainty of a potential trade war. Farm income has declined for a second straight year, and we know from experience that farmers and rural communities are the first to suffer from retaliatory tariffs. We are pleased that the administration is delaying tariffs on Mexico, but the uncertainty surrounding tariffs and the potential for retaliation makes it difficult to plan for the future. We hope the administration will consider the economic impact on Illinois farmers and rural communities when contemplating tariff implementation.”
Illinois is the largest total exporting state in the Midwest and the fourth largest in the country. Total exports from Illinois in 2023 were estimated at $81 billion, of which $13.7 billion was attributed to agriculture.
Bob Hemesath, president of Farmers for Free Trade, who farms in northern Iowa, said the month-long pause on the tariffs was welcome news, but he hoped for a more permanent solution. “Any disruption is going to hurt on the farmgate level. Our inputs, you put 25% tariff on top of already high fertilizer costs, and that’s a real hurt to the farmer when he goes to put his crop in. Mexico’s No. 1 in corn, we sell ethanol to Canada, among other things. A lot of pork goes into Mexico. So, we were concerned what the effects on those markets would be.” Canada exports potash, and China exports chemical inputs to U.S. farmers.
National responses
In response to Trump’s original announcement, Canadian Prime Minister Justin Trudeau announced he would respond with 25% tariffs on $107 billion (U.S.) worth of goods, covering thousands of specific products, including food from meat to orange juice, appliances, rubber tires, lumber and paper product and clothing.
Pierre Poilievre, leader of Canada’s opposition Conservative Party, whom many believe will be Canada’s next prime minister, said, “Our entire trade surplus [with the United States] is due to oil and gas. We export at enormous discounts to market price. Depending on the time, we sell a barrel of oil to the Americans for 10 to 30 or 40% cheaper than the world price. If President Trump wants to make America richer, the last thing he should want to do is block the underpriced Canadian energy from going into his marketplace.”
Ontario Premier Doug Ford said he was canceling a $100-million contract with Elon Musk’s Starlink satellite communications company in response to Trump’s tariffs on Canada. Musk is a prominent Trump adviser and the head of Trump’s Department of Government efficiency. Ford further promised to ban all American companies from Ontario contracts until the tariffs are lifted. It was unclear at press time whether or not Ford would continue with his actions now that the tariffs are paused. Canada’s provinces are more independent of the central government than are American states.
Sheinbaum said, “We have Plan A, Plan B, Plan C for whatever the U.S. government decides. It’s important to remember the implications that imposing tariffs could have for the U.S. economy.”
Business, union responses
The Wall Street Journal’s editorial board called the tariff actions “the dumbest trade war in history.” Businesses and importers have lobbied Trump and his team to modify the tariffs or create exemptions, arguing that they could create supply-chain chaos. Most business leaders and economists have said the tariffs will raise prices for American consumers.
John Murphy, senior vice president and head of international policy at the U.S. Chamber of Commerce, said, “The president is right to focus on major problems like our broken border and the scourge of fentanyl, but the imposition of tariffs under IEEPA is unprecedented, won’t solve these problems and will only raise prices for American families and upend supply chains. The chamber will consult with our members, including main street businesses across the country impacted by this move, to determine next steps to prevent economic harm to Americans. We will continue to work with Congress and the administration on solutions to address the fentanyl and border crisis.”
The United Steelworkers union, many of whose members are strong Trump supporters, said, “The USW has long called for systemic reform of our broken trade system, but lashing out at key allies like Canada is not the way forward. Canada has proven itself time and again to be one of our strongest partners when it comes to national security, and our economies are deeply integrated. The key to eliminating unfair competition, confronting global overcapacity in crucial sectors and stemming the flow of unfairly traded products making their way into North America is targeted tariffs on countries that violate our trade laws and greater coordination with our trusted allies—not sweeping actions that undermine crucial relationships.
“Approximately $1.3 trillion worth of goods cross the Canada-U.S. border annually, supporting 1.4 million American jobs and 2.3 million Canadian jobs. These tariffs don’t just hurt Canada. They threaten the stability of industries on both sides of the border. … Our union calls on President Trump to reverse course on Canadian tariffs so that we can focus on trade solutions that will serve working families for the long-term.”
David Murray can be reached at [email protected].