Trump Slaps 25% Tariffs On Canada, Mexico: Loonie, Peso Slide, Oil Climbs

It was in the air, but now it's official. President Donald Trump confirmed Thursday the United States will impose 25% tariffs on imports from Canada and Mexico starting Saturday, Feb. 1.

The move follows Trump's promise to impose tariffs due to concerns over illegal immigration, wide trade deficits and fentanyl trafficking from both countries.

Data from TradingEconomics shows the U.S. imported $429.6 billion in goods from Canada in 2023 and $480 billion from Mexico. This makes Mexico the largest U.S. trading partner in terms of imports, followed by China at $448 billion and Canada in third place.

As reported by Bloomberg, Trump laid out three reasons for the tariffs during an interview with reporters on Thursday:

Illegal immigration: “People have poured into our country so horribly and so much.”
Drug trafficking: “Fentanyl and everything else that have come into the country.”
Trade deficits: “The massive subsidies that we're giving to Canada and Mexico in the form of deficits.”

Trump also suggested the tariff rate could increase over time and said a decision on Canadian oil tariffs would be made later in the day, depending on oil prices.

“We don't need the products that they have. We have all the oil that you need. We have all the trees you need,” he added, referring to major Canadian exports.

Market Reactions: Peso, Loonie Drop; Oil Surges

Markets reacted sharply to the news. The Canadian dollar – as tracked by the Invesco CurrencyShares Canadian Dollar Trust FXC – weakened by 0.6%, with the USD/CAD exchange rate rising to 1.4480. The Mexican peso slid by over 1%, pushing USD/MXN to 20.60.

The U.S. dollar index (DXY) gained, indicating the greenback’s strength across currencies.

WTI oil futures – as closely tracked by the United States Oil Fund USO – saw an immediate uptick before slightly paring back those gains.

The S&P 500 index – tracked by the SPDR S&P 500 ETF Trust SPY – fell minutes prior to the New York close.