Trump slapped 25% tariffs on Canada and Mexico while doubling tariffs on China from 10% to 20%.

You're a very smart guy.

This is a very dumb thing to do.

This means any goods shipped from Canada to the U.S., including auto parts, lumber, steel, pharmaceuticals, wheat, pork, beef, and minerals, will cost U.S. importers 25% more.

That cost will then be passed on to American consumers, resulting in higher prices.

For example, Honda manufactures 400,000 vehicles a year out of its Alliston, Ontario, plant in Canada.

The Honda CR-V, which previously cost Americans around $35,000, is now subject to a 25% tariff, adding up to an additional $8,750, which could push the final price to $43,750.

Just one day after the tariffs took effect, the Trump administration announced a one-month delay on tariffs for certain vehicles built in North America, but only for the big three automakers, GM, Ford, and Stellantis, the parent company of Chrysler.

And then the next day, he appeared to soften the blow slightly, delaying tariffs for one month on all products from Mexico and Canada that fall under the free trade agreement, though around half of all imports from both countries still remain subject to tariffs.

Why is Trump doing this?

Why is he knowingly making things more expensive for Americans?

He says these tariffs are necessary to stop the flow of fentanyl across both the northern and southern borders.

The fentanyl coming through Canada is massive.

The fentanyl coming through Mexico is massive.

But is that really the case?

Do the numbers support what he's saying?

U.S. border authorities seized 22,000 pounds of fentanyl in 2024.

From that total, only 43 pounds, 0.2%, came from the Canadian border. 21,000 pounds, making up 97%, were seized at the Mexican border.

Canada still launched a $1.3 billion border security initiative, which deployed additional personnel, drones, and other surveillance equipment, and also appointed a fentanyl czar to oversee the effort.

For Mexico, Trump also stated the tariffs are meant to pressure the country into taking stronger action against illegal immigration.

In response to the tariff threat, Mexico deployed 10,000 soldiers to the border.

Illegal border crossings have plummeted since Trump took office.

In February, Trump announced U.S. Border Patrol apprehended 8,326 migrants, compared to 189,913 in February 2024 under the Biden administration.

Illegal border crossings last month were by far the lowest ever recorded, ever.

Despite the decline in illegal crossings and the crackdown on drugs, the tariffs still went into effect.

Trump himself made it clear why.

He said on Truth Social, "If companies move to the United States, there are no tariffs."

A major reason behind Trump's tariffs is to incentivize businesses to move manufacturing and production back to the U.S., investing in American jobs, factories, and infrastructure.

And it's already having an effect.

Reuters reports Honda will now produce its next-generation Civic Hybrid in Indiana instead of Guanajuato, Mexico.

This, in theory, would strengthen the U.S. economy and reduce dependence on foreign countries, especially during global crises like COVID-19, which exposed weaknesses in global supply chains.

Trump has also repeatedly joked about Canada becoming the 51st state and has been calling Prime Minister Trudeau governor.

Trudeau hasn't taken these comments lightly, hitting back against Trump's tariffs.

Canada will be implementing 25% tariffs against $155 billion worth of American goods.

There are no winners in a trade war.

These retaliatory tariffs mean American goods will now be more expensive for Canadians, like toilet paper.

Canada imports 87% of its toilet paper from the U.S., as well as oranges, lettuce, berries, Doritos, Oreos, to name just a few.

Although Trudeau, who has been incredibly unpopular in Canada, is on his way out the door, Canada's stance on the trade war isn't softening.

Krista Freeland, a candidate for Canada's Liberal Party leadership and potentially the next prime minister, vows to target Tesla.

An example of a measure that I will put in place as prime minister is 100% tariffs on Teslas.

I think that should get some attention in the White House.

The CEO of Tesla, Elon Musk, has been a dominant force in Trump's second term.

Here in Canada, there's been a big push to buy Canadian.

So Harvey's, which is a Canadian fast food chain, has started displaying the Canadian flag by their window.

I'm also here in a grocery store where products are being labeled made in Canada.

So this aisle used to be stocked with California wine, but instead it's been restocked with Canadian alcohol.

Doug Ford, the premier of Ontario, Canada's most populous province, threatened a 25% surcharge on Canadian electricity flowing to Michigan, New York, and Minnesota.

If they want to try to annihilate Ontario, I will do everything, including cut off their energy, with a smile on my face.

The problem for Canada and Mexico is that there is a huge trade imbalance.

Canada relies on the U.S. more than the U.S. relies on Canada. 76% of Canada's exports go to the U.S., making up nearly 18% of Canada's GDP.

For Mexico, 78% of its total exports head to the U.S., accounting for roughly 30% of its GDP.

On the other hand, 17% of American exports go to Canada and 16% to Mexico, making up just 2% of the U.S. GDP in total.

In other words, tariffs will hurt Canada and Mexico more than the U.S.

So what do these tariffs actually mean for inflation?

Defined as a sustained increase in the general price level across the economy over time.

The initial price increase isn't inflation.

It's the immediate effect of a tax on imports.

Car tariffs also apply to auto parts like brakes, tires, and engines.

But if the tariffs stay in place for a long time, it sets off a chain reaction.

Repair costs go up as mechanics and auto shops raise their prices to cover these higher costs.

If new cars are too expensive, more people turn to the used-car market, driving up demand and pushing used-car prices higher, too.

And since people are holding onto their cars longer, they need more repairs and maintenance, which increases demand for mechanics.

That makes mechanics more valuable, so they charge higher wages.

If mechanics and autoworkers are earning more, other industries have to raise wages to compete, like construction workers or factory workers.

Eventually, higher labour costs get passed down to consumers across multiple industries, which is when tariffs turn into real inflation.

The Federal Reserve plays a crucial role in managing inflation.

If tariffs lead to sustained price increases, the Fed might respond by raising interest rates, making borrowing more expensive, and cooling demand to curb inflation.

Or President Trump could change his mind and eliminate tariffs, as he did in his first term, lifting tariffs on steel and aluminium after one year.

This time around, though, the tariffs are far more extensive, impacting nearly every product.

For Trump, tariffs aren't just about trade.

He believes the US hasn't been taken seriously on the global stage for a long time.

The United States has been taken advantage of for 40 years.

The United States has been a laughingstock for years and years.

That's why this gentleman is built in Taiwan instead of building here.

It would have been better if he built here.

In President Trump's view, tariffs aren't just an economic tool.

They're a way to reassert American power.

I believe that my life was saved that day in Butler for a very good reason.

I was saved by God to make America great again.

I believe that.

Thank you.

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Thanks for watching.

For Newsthink, I'm Cindy Pom.