On Feb. 1, President Trump signed an executive order imposing 25% tariffs against Canada and Mexico, as well as 10% tariffs against China, set to begin on Tuesday. Political leaders in both Canada and Mexico are threatening counter tariffs. Canada sends 75% of all its goods and services exports to the United States. Mexico is the U.S. largest trading partner, representing over 15% of the U.S. total trade. The U.S. has a growing trade deficit with Mexico.
The already-weakened Canadian dollar is expected to go lower. Matt Poirier, vice president of government relations at the Retail Council of Canada, warned of immediate inflation in food prices. In winter, much of Canada’s food is imported from the U.S.
A combination of Canadian counter-tariffs and reduced purchasing power of the Canadian dollar, could cause large and sudden price rises. The U.S., in turn, is heavily reliant on Mexican agricultural imports.