Trump’s Tariffs poised to Impact Major Trading Allies Starting Next Week

President Donald Trump announced on Thursday the implementation of 25% tariffs on imports from Canada and Mexico, starting Tuesday. This move targets Texas’ largest trading partners and follows an earlier directive to combat the influx of illegal drugs into the United States.

Initially, Trump had postponed the tariffs last month after both nations pledged to enhance efforts against drug trafficking. However, in a recent social media post, he reaffirmed that the tariffs “will, indeed, go into effect, as scheduled.” In addition, Trump plans to impose a further 10% tariff on China, building on an earlier tariff enacted last month.

“Drugs are still pouring into our Country from Mexico and Canada at very high and unacceptable levels,” Trump stated, highlighting the serious issue of fentanyl production linked to China.

In response to concerns about drug trafficking, leaders from Mexico and Canada announced plans to deploy troops to the border. Both Mexican President Claudia Sheinbaum and Canadian Prime Minister Justin Trudeau committed to send 10,000 soldiers to combat fentanyl smuggling and established a “Fentanyl Czar” to enhance intelligence collaboration with the U.S.

According to the Texas governor’s office, trade between Texas and Mexico exceeded $272 billion in 2023, with imports from Mexico alone surpassing $142 billion. The new tariffs will affect all these goods.

In retaliation, Mexico, Canada, and China are contemplating their own tariffs against U.S. goods, posing risks to Texas exports. Even voices within Texas’ business community, typically supportive of Trump, express concern regarding the potential negative impact on the state’s economy.

“We need a strong North America, and that means keeping North America tariff-free,” said Glenn Hamer, CEO of the Texas Association of Business. His organization endorses many of Trump’s initiatives, yet fears that tariffs could lead to increased consumer prices.

Hamer noted that even the threat of tariffs is causing a chilling effect on investments. “Businesses like predictability,” he remarked, emphasizing the need for a stable economic environment.

Texas boasts one of the fastest-growing economies in the U.S., largely attributed to its loose regulatory landscape. The state has a larger gross domestic product than Russia and is second only to California.

Governor Greg Abbott’s office issued a statement supporting the administration’s intentions to restrict illegal drug trafficking. “Fentanyl made and exported by China…is a clandestine killer,” noted Andrew Mahaleris, a spokesperson for Abbott.

Texas is home to about a third of the country’s refining capacity, with Canada supplying over half of the U.S.’s crude oil imports. Trump indicated earlier that Canadian energy imports would face a reduced 10% tariff rate.

The potential for retaliatory tariffs has previously impacted Texas’ agriculture sector, with a significant loss of buyers in China during Trump’s earlier trade disputes. Brooke Rollins, Secretary of Agriculture, expressed support for additional aid to affected farmers.

There remains the possibility of negotiating a resolution. Sheinbaum expressed optimism during a news conference, indicating ongoing discussions with the Trump administration. However, Trump has yet to clarify conditions that would prevent the tariffs from taking effect.

If the tariffs proceed, Hamer warned the business community to “brace for impact.”