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It’s inauguration day in the United States, as Donald Trump is sworn is as the 47th president. As the whole world knows by now, he plans to impose a 25% tariff on all imports from Canada and Mexico on his first day in office.
His announcement a couple of months ago on social media sent Ottawa into near panic mode, with an emergency Commons debate, an urgent first ministers’ meeting, and a clandestine trip to Mar-a-Lago by Prime Minister Trudeau and a few top aides. The hope is that Trump’s announcement is a negotiating ploy, designed to pressure Canada and, especially, Mexico to get tougher on illegal immigration and cross-border drug smuggling.
That may be the case, but the odds are that Trump will do exactly what he says on Jan. 20, the day he is sworn in. The reason is simple: To back down would make him look like a loser to some of his followers. Mr. Trump hates losers. To be seen as one is anathema to him.
Re-read his Truth Social post. “On January 20th, as one of my many first Executive Orders, I will sign all necessary documents to charge Mexico and Canada a 25% Tariff on ALL products coming into the United States, and its ridiculous Open Borders,” he wrote.
Not “might sign” or “will consider signing” but “will sign.” No wiggle room there. Yes, he tied the decision to two non-trade issues. But it would look like a cop-out if he were to suddenly proclaim that the immigration and drug issues had been magically solved in less than two months, allowing him to shelve the idea. The last thing he wants is to look like he is vacillating on his first day back in the White House.
The media and our politicians have repeatedly called this a “threat.” It’s not. It’s a promise. This is not a question of semantics. There’s a huge difference between “threatened” and “promised.”
So, I expect the tariffs will be imposed. There will be howls of protest, not just from Ottawa and Mexico City, but also from a range of angry Americans from car manufactures to oil industry. Mr. Trump won’t care. He never does.
The real question is, how long will the tariffs remain in place? Having kept his promise, I suspect Mr. Trump will quickly find reasons to carve out certain sectors. The first will probably be oil. A 25% tariff will immediately drive gas prices higher. That won’t sit well with his base, which elected him partly because voters were fed up with inflation. Oil tariffs would also put pressure on U.S. refineries that process Canadian crude, endangering Trump’s goal of American self-sufficiency.
I can see other carve outs quickly following, especially in the agriculture sector. Manufacturing, especially auto parts, is another matter. It seems that Trump’s ultimate objective is to concentrate most or all U.S. car production within U.S. borders. That’s not likely to happen giving the integrated state of the industry across North America. But that doesn’t mean he won’t try.
We asked our social media followers what economic sectors they felt would suffer the most from Trump’s tariff policy. Here is the response.
This wasn’t a scientific poll, but the responses pretty much reflect what economists have been telling us.
There is no doubt that a sustained tariff program would deal a serious blow to the Canadian economy. Stephen Tapp, chief economist at the Canadian Chamber of Commerce, said last week that a 25% tariff on all Canadian imports could push Canada into a recession by the middle of 2025.
The Chamber calculates that if implemented, the plan would shrink Canada’s GDP by 2.6% (roughly $78 billion), costing Canadians approximately $1,900 per person annually.
But it would hit Americans too. Their GDP would fall 1.6% (about US$467 billion), costing individuals approximately $1,300 per person every year.
“Make no mistake, if Trump imposed these tariffs, it would represent a significant negative shock to the US economy,” Mr. Tapp said. “It would raise costs for businesses, make American production less competitive internationally, and raise prices even more for consumers who’ve recently suffered through the pandemic and the highest inflation in generations.”
If this analysis is anywhere near accurate, Mr. Trump will have to reverse course at some point. But he will want to claim some kind of victory to save face. Canada and Mexico should do everything possible to help him achieve that goal.
Gordon Pape is one of Canada’s best-known personal finance commentators and investment experts. He is the publisher of The Internet Wealth Builder and The Income Investor newsletters, which are available through the Building Wealth website.
Follow Gordon Pape on X at X.com/GPUpdates and on Facebook at www.facebook.com/GordonPapeMoney.
Notes and Disclaimer
Content © 2025 by Gordon Pape Enterprises. All rights reserved. Reprinted with permission. The foregoing is for general information purposes only and is the opinion of the writer. Securities mentioned carry risk of loss, and no guarantee of performance is made or implied. This information is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting, or tax advice. Always seek advice from your own financial advisor before making investment decisions.
Image: iStock.com/Amy Mitchell
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