Trump tariffs: Canada, China and Mexico to be hit with levies on Saturday, White House says

Dollar gains and Treasury yields rise as Canada threatens to retaliate

US President Donald Trump with China's President Xi Jinping at a G20 summit in Osaka, Japan, in 2019. Mr Trump is introducing measures he says will protect the US economy, as he did during his first term. APShow less

The US on Saturday will begin imposing President Donald Trump's tariffs on China, Canada and Mexico, the White House announced, as America's largest trading partners brace for the economic impact.

White House press secretary Karoline Leavitt told reporters Mr Trump will introduce a 10 per cent tariff on China, framing the decision as a retaliatory move for “the illegal fentanyl that they have sourced and allowed to distribute into our country”. Mr Trump will also enact 25 per cent tariffs on Canadian and Mexican imports.

“These are promises made, and promises kept,” Ms Leavitt said.

The US dollar gained following the announcement, particularly against the Mexican peso and Canadian dollar.

The S&P 500, Dow Jones Industrial average and Nasdaq Composite indices all turned negative following the tariff announcement while yields on the US 10-year Treasury rose.

Canada, China and Mexico are Washington's three largest trading partners, comprising 41.1 per cent of total trade last year, according to the US Census Bureau.

The tariffs would end months of speculation on what trade policy under Mr Trump's administration would look like after he spent much of the 2024 election campaign promising to impose levies on other countries.

But his tariff plans have been met with consternation from other leaders including Canadian Prime Minsiter Justin Trudeau, who vowed to take retaliatory action.

“If the tariffs are implemented against Canada, we will respond. We won’t relent until tariffs are removed and, of course, everything is on the table,” he said during a meeting of the Council on Canada-US Relations in Ontario.

The departing Canadian leader said he hoped that Mr Trump would reconsider the levies, and that he would be prepared to pursue a “purposeful, forceful but reasonable, immediate” response if not.

This illustration from the Bank of Canada shows how Canada's and the US's economies could both be hit from a 25 per cent tariff. Photo: Bank of Canada

Mexican President Claudia Sheinbaum did not specify details on how she would respond, but said her government would do so with a “cool head”.

Central bank officials in China, where the yuan has weakened to a 16-month low, had already intervened in January to stabilise the currency by announcing a bill sale of 60 billion yuan in Hong Kong to discourage speculative trading.

The tariffs are expected to weigh on Canada's economy, Mr Trudeau said. His warning echoed comments from the Bank of Canada earlier this week, which released an assessment that showed a 25 per cent tariff scenario would weaken economic growth and lift inflation in both Canada and the US.

The Trump tariffs have also caused the Federal Reserve to slow the pace of its interest rate cuts due to the uncertainty over their impact on the economy. The US central bank held rates steady on Wednesday.