Trump doubles down on 25% tariffs for Canada and Mexico, ordering sweeping review of trade policies

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North America’s free-trade agreement is set to be scrutinized as part of a sweeping investigation into U.S. trade policy that was ordered by President Donald Trump, who is pushing an “America first” approach to business matters upon his return to the White House.

Mr. Trump ordered several cabinet secretaries and senior officials on Monday to investigate a slew of trade issues, including the United States-Mexico-Canada Agreement, the U.S.’s persistent trade deficits and new export opportunities. Mr. Trump has requested reports and recommendations on trade policy by April 1.

Despite that timeline, the U.S. President reiterated on Tuesday evening that he intends to enact 25-per-cent tariffs on Canada and Mexico on Feb. 1. He said the steep levies are unrelated to other trade concerns, such as renegotiation of the USMCA, which is up for review in 2026.

Mr. Trump appeared to be pushing back on a Wall Street Journal article, which was published on Tuesday and said the President was threatening tariffs to draw Canada and Mexico back to the bargaining table ahead of schedule to renegotiate the trade pact, citing sources close to the matter.

“It has nothing to do with that,” he said at a news conference, pointing instead to border issues as his motivation.

Canada and Mexico, Mr. Trump said, have “allowed millions and millions of people to come into our country that shouldn’t be here. They could have stopped them and they didn’t.”

He also faulted both countries for allowing the movement of drugs that have killed hundreds of thousands of Americans: “The fentanyl coming through Canada is massive,” he said. “The fentanyl coming through Mexico is massive.”

Mr. Trump also mused about “a tariff of 10 per cent on China based on the fact that they’re sending fentanyl to Mexico and Canada.”

The trade memo, by contrast, concerns a host of matters. For one, it orders the U.S. trade representative to assess the impact of the USMCA on American workers and farmers, among others, and to “make recommendations regarding the United States’ participation in the agreement.”

Free trade between Canada, Mexico and the U.S. previously came under threat during the first Trump administration when the President threatened to scrap the North American free-trade agreement, or NAFTA. However, Mr. Trump has repeatedly boasted about securing a renegotiated pact, the USMCA, which came into force in 2020. U.S. trade of goods and services under the USMCA amounted to US$1.8-trillion in 2022, according to the country’s trade representative.

Mr. Trump’s discussion of a more immediate tariff, however, suggests he is using that measure to achieve a more narrow set of aims, said Kelly Ann Shaw, who was a lead trade negotiator in Mr. Trump’s first administration.

“The 25-per-cent tariffs are focused on immigration and fentanyl, which he said again [Monday] night, as opposed to other issues,” she said.

Dan Ujczo, an international trade lawyer who is senior counsel at Thompson Hine in Columbus, Ohio, describes that as a “tactical tariff,” one that could be withdrawn if it accomplishes what Mr. Trump seeks.

“They’re meant to achieve those specific objectives,” he said. “And in many ways, they’re meant to be short-term, hopefully.”

At the same time, the wide-ranging trade review provides some guidance on the Trump administration’s top concerns, but the document offers little certainty to Canadian officials and businesses about the policies it’s likely to pursue, trade lawyers in Canada said on Tuesday.

“This is a very broad reaching trade policy initiative by the United States that can, if implemented, drastically change trade patterns and supply chain relationships and the viability of many companies that rely on the United States as their primary export market,” said Brenda Swick, a partner at Cassels Brock & Blackwell LLP.

Sabrina Bandali, a partner at Bennett Jones who specializes in international trade and investment law, said the memo demonstrates the U.S. administration’s skepticism toward multilateral trading agreements and the international rules-based trading system.

The memo asks the U.S. trade representative to identify countries where bilateral or sector-specific agreements can be negotiated to open up export market access for Americans. Canada’s supply management system, which limits market excess for dairy, poultry and egg to protect domestic farmers from competition, could be targeted.

Mr. Trump “may be saying once again to Canada: ‘We are not interested in an agreement with you, Canada, unless you put supply management on the table and allow for unlimited access of American dairy into the Canadian market,’” Ms. Swick said.

The Trump administration has also asked the treasury secretary to look into any “discriminatory or extraterritorial taxes” other countries are imposing on U.S. citizens or corporations. The Biden administration opposed Canada’s implementation of a digital services tax, which will apply a 3-per-cent tax on certain revenues generated by tech giants such as Google and Amazon.

Wolfgang Alschner, an associate professor at the common law section of the University of Ottawa, said the focus on tariffs as source of revenue generation in the trade memo is “disconcerting.”

But he said the memo also offers Canada an opportunity to make the case to the U.S. that it can help strengthen its economic security by co-ordinating responses to common threats from countries such as China and Russia, while strengthening critical mineral supply chains.

“I would hope that the government is eyeing an economic security agreement with the U.S. There’s lots of fodder for that in the document,” Prof. Alschner said.