Trump set to launch Canada, Mexico tariffs on March 1 with exemptions, sources say

WASHINGTON: US President Donald Trump is expected to announce new tariffs on imports from Canada and Mexico that would become effective on March 1, but will include a process for the countries to seek specific exemptions for certain imports, three people familiar with the planning told Reuters.

The tariff deliberations remained fluid ahead of Trump’s self-imposed Feb 1 deadline for a formal announcement.

The sources, who asked not to be named because they are not authorized to speak publicly on the matter, said they did not have details on a final tariff rate, but noted Trump has consistently said that he plans to impose a 25 per cent tariff on imports from the two countries on Saturday.

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Separately, an administration official said Trump on Friday was reviewing tariff plans, which may allow for some exemptions. Still, any exemptions would be “few and far between,” the official said.

While the announcement of tariffs may roil financial markets and strain the US relationship with its top two trading partners, offering a 28-day window before implementation and possible exemptions would suggest a more careful approach by the Trump administration.

It also would buy time for negotiations over actions by Canada and Mexico to meet Trump’s stated goals for the duties to pressure the two US neighbors to halt the flow of illegal immigrants and deadly fentanyl opioids across the US border.

Trump’s punitive duties and retaliatory tariffs from Canada and Mexico threaten to disrupt nearly $1.6 trillion in North American trade and effectively end a 30-year free trade system that has deeply integrated the three economies.

The US president said on Thursday he still is considering an additional 10 per cent on Chinese imports to punish Beijing for its alleged role in the fentanyl trade. But the sources said the March 1 tariffs would apply only to Canada and Mexico, leaving his plans for new China duties unclear.

Decisions on the tariffs are being managed by a core White House team, not the incoming trade team to be led by Commerce Department nominee Howard Lutnick and US Trade Representative nominee Jamieson Greer, a source familiar with the matter said. Neither have been confirmed by the US Senate, but the Senate Finance Committee has scheduled a Feb 6 confirmation for Greer.

Trump hinted about possible exemptions on Thursday when he said he would soon decide whether to apply the tariffs to imports of Canadian and Mexican oil, an indication that he may be concerned about their impact on gasoline prices. Crude oil is the top US import from Canada and among the top five from Mexico, according to US Census Bureau data.

A White House spokesperson said that no tariff announcements were planned for Friday.

Trump trade advisor Peter Navarro told CNBC on Friday that tariff revenue will help pay for the extension of Trump’s 2017 tax cuts, which total some $4 trillion and expire this year.

Two sources familiar with the matter said that Trump was expected to invoke the International Emergency Economic Powers Act (IEEPA) as the legal basis for the tariffs, declaring a national emergency over fentanyl overdoses that killed nearly 75,000 Americans in 2023 and illegal immigration.

IEEPA, enacted in 1977 and modified after the Sept 11, 2001 attacks on the US, gives the president broad powers to impose economic sanctions in a crisis.

Among the trade law tools at Trump’s disposal, it would give him the fastest path to imposing broad tariffs, as others require lengthy investigations by the Commerce Department or USTR.

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Economists and business executives have warned that the tariffs would spark major increases in the prices of imports such as aluminum and lumber from Canada, fruits, vegetables, beer and electronics from Mexico and motor vehicles from both countries.

Tariffs are paid by firms that import goods and pass the costs on to consumers or accept lower profits, economists say.

“President Trump’s tariffs will tax America first,” said Matthew Holmes, public policy chief at the Canadian Chamber of Commerce. “From higher costs at the pumps, grocery stores and online checkout, tariffs cascade through the economy and end up hurting consumers and businesses on both sides of the border.”

Canadian Prime Minister Justin Trudeau on Friday said Canada would immediately respond with forceful countermeasures, adding “It’s not what we want, but if he moves forward, we will also act.”

Canada has drawn up detailed targets for immediate tariff retaliation, including duties on orange juice from Florida, Trump’s adopted home state, a source familiar with the plan said. Canada has a broader list of targets that could reach C$150 billion worth of US imports, but would hold public consultations before acting, the source said.

During Trump’s first term, China targeted U.S. soybeans and other farm products, while the European Union hit iconic American products including bourbon whiskey and Harley-Davidson motorcycles.

Mexican President Claudia Sheinbaum said she would “wait with a cool head” for Trump’s tariff decision and was prepared to continue a border dialogue.

“We will always defend the dignity of our people, respect for our sovereignty and a dialogue as equals without subordination,” she said.

Sheinbaum previously said Mexico also would retaliate, arguing that Trump’s tariffs would cost 400,000 US jobs and drive up prices for US consumers.

Trump last Sunday waged a 10-hour trade war of words with Colombian President Gustavo Petro, threatening the South American country with 25 per cent tariffs over its refusal to allow US military flights loaded with Colombian deportees. The crisis ended when Petro agreed to accept the flights.

China has been more circumspect about its retaliation plans. Liu Pengyu, a spokesperson for China’s embassy in Washington, emphasized China’s cooperation with the US on curbing fentanyl trafficking and said he hopes the US “will not take China’s goodwill for granted.”

A US trade group executive, speaking on condition of anonymity, said that recent comments from Trump indicating some progress on fentanyl and immigration concerns showed that there was a good chance that tariffs would be announced but suspended. The executive added that Trump may need to back his threats with action.

“If they keep threatening and then don’t put them in place, they’re going to lose credibility,” the executive said.