According to media reports, a Trump administration official stated that President Trump would not impose new tariffs on his first day in office. Instead, he has directed federal agencies to assess U.S. trade relations with China, Canada, and Mexico. This unexpected development led to a drop in the U.S. dollar and a rebound in global stock markets.
President Trump was inaugurated at noon Eastern Time on January 20. He had previously pledged to impose tariffs of "10% to 20%" on all imports and a 60% tariff on Chinese products to help reduce the U.S.'s annual trade deficit of up to $1 trillion.
After his election in November, Trump also indicated that he would sign an order on his first day in office to impose a 25% import surcharge on goods from Canada and Mexico if those countries failed to curb illegal immigration and drug trafficking into the U.S.
On the evening of January 20, Trump announced plans to implement a 25% tariff on Canadian and Mexican products starting February 1. He also mentioned that he was still considering a general tariff on all foreign exports to the U.S., but was "not ready yet."
The official confirmed a report by The Wall Street Journal citing a summary of a Trump memorandum. The memo states that the president will direct U.S. agencies to investigate and address the country's persistent trade deficits and unfair trade and currency practices by other nations.
Under the memorandum, the U.S. government will review trade relations with China, Canada, and Mexico but will not immediately announce new tariffs. The memo also directs agencies to evaluate compliance with the U.S.-China trade agreement signed in 2020. Additionally, the United States-Mexico-Canada Agreement (USMCA), which governs $1.8 trillion in trade, will be subject to a review in 2026.
The Trump administration also plans to establish a Foreign Tax Authority tasked with collecting "significant" tariffs and other revenues from foreign countries. Trump stated, "I will immediately begin reforming our trade system to protect American workers and families. We will not tax our citizens to enrich other countries; we want to tax other countries to make our citizens richer..."
In response to Trump's plans, Canada and Mexico warned that they would impose retaliatory tariffs on U.S. goods if such tariffs were enacted. Canada has already prepared a preliminary list of U.S.-made products worth CAD 150 billion (approximately USD 105 billion) for potential tariffs. Mexico stated that tariffs could affect the $800 billion annual trade between the two nations and might drive up U.S. inflation. Trade experts cautioned that these measures could dismantle the long-standing USMCA, disrupt automotive supply chains, and increase vehicle costs.
In a November research report, Bernstein analysts predicted that Trump's proposed tariffs would spell "disaster" for the U.S. auto industry and Detroit automakers, which rely heavily on vehicle imports from Canada and Mexico. The report highlighted that approximately 40% of Stellantis vehicles sold in the U.S. are imports, as are 30% of General Motors vehicles and 25% of Ford vehicles.
Wolfe Research estimated that additional tariffs would impact $97 billion worth of auto parts and 4 million vehicles exported from Mexico and Canada to the U.S., potentially increasing the average price of a new car in the U.S. by about $3,000.
