Canada and Mexico have hit back with retaliatory tariffs on President Donald Trump’s steep tax on goods imported from its neighbours.

Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum both announced the counter-tariffs on Saturday night.

Mr Trudeau said Canada would impose 25% tariffs on $155bn Canadian dollars (£85.9bn) of US goods in response to Mr Trump‘s 25% tariffs on goods. Energy imported from Canada, including oil, natural gas and electricity, would be taxed at a rate of 10%.

Duties on $30bn Canadian dollars (£16.6bn) in trade in American alcohol and fruit will take effect on Tuesday when the US tariffs are set to start. The remaining $125bn Canadian dollars (£69.3bn) will take effect in 21 days.

Mr Trudeau opened his speech with a passionate message aimed at American consumers.

“It will have real consequences for you, the American people,” he said, saying it would result in higher prices on groceries and other goods.

The outgoing prime minister channelled the views of many Canadians who feel betrayed by their neighbour and longtime ally.

US action ‘split us apart’

Mr Trudeau reminded Americans that Canadian troops fought alongside them in Afghanistan and helped them respond to domestic crises including the wildfires in California and Hurricane Katrina.

“The actions taken by the White House split us apart instead of bringing us together,” Mr Trudeau said. He also encouraged Canadians to “choose Canadian products and services rather than American ones”.

What is Mexico’s stance?

Ms Sheinbaum said in a post on X that she had ordered her economic minister to implement tariff and non-tariff measures to defend Mexico’s interests.

“We categorically reject the White House’s slander that the Mexican government has alliances with criminal organisations, as well as any intention of meddling in our territory,” Ms Sheinbaum wrote.

“If the United States government and its agencies wanted to address the serious fentanyl consumption in their country, they could fight the sale of drugs on the streets of their major cities, which they don’t do and the laundering of money that this illegal activity generates that has done so much harm to its population.”

Fentanyl crackdown

The Trump administration had said that the tariffs aimed to stop the spread and manufacturing of the opioid fentanyl, as well as pressuring America’s neighbours to limit illegal immigration to the US.

China’s commerce ministry said it would challenge its 10% US tariff through the World Trade Organisation (WTO). The ministry said the measure “seriously violates” WTO rules and urged the US to “engage in frank dialogue and strengthen cooperation”.

Earlier on Saturday, President Trump signed the order imposing steep tariffs on imports from the three countries, risking a trade war and higher prices for American consumers.

Mr Trump declared an economic emergency in order to place duties of 25% on goods from Mexico and Canada, and 10% on all imports from China.

The tariffs also include a mechanism to escalate the rates if the countries retaliate.

👉 Listen to Sky News Daily on your podcast app 👈

Mexico and Canada are two of America’s largest trading partners, with the tariffs upending decades-old trade relationships.

Could US measures push up inflation?

Mr Trump said on social media that the tariffs – a longstanding campaign promise – were necessary “to protect Americans”.

But the taxes may throw the global economy into turmoil and significantly worsen inflation in the US – which has already increased the prices of groceries, fuel, housing, cars and other goods.

Read more:
How Trump’s tariffs could impact consumers
Why is Trump imposing the tariffs?

A new analysis by the Budget Lab at Yale University found that the average US household would lose the equivalent of $1,170 US dollars (£944) in income from the tariffs. The research also found that economic growth would slow and inflation would worsen – especially if Canada, Mexico and China retaliate.

“It doesn’t make much economic sense,” said William Reinsch, senior adviser at the Centre for Strategic and International Studies and a former US trade official.

“Historically, most of our tariffs on raw materials have been low because we want to get cheaper materials so our manufacturers will be competitive… Now, what’s he talking about? He’s talking about tariffs on raw materials. I don’t get the economics of it.”

Mr Trump appears to be preparing more import taxes.

On Friday, he suggested imported computer chips, steel, oil and natural gas, as well as copper, pharmaceutical drugs and imports from the European Union may be subject to tariffs, which could pit the US against much of the global economy.

Donald Trump has long threatened increasing tariffs on goods from Mexico, Canada, and China.

The second-time president argues higher levies will help reduce illegal migration and the smuggling of fentanyl to the US.

On Saturday, the president confirmed that he would subject Mexican and Canadian goods to the full 25% tariff – and Chinese imports to 10%.

However, Canadian energy, including oil, natural gas and electricity, will be taxed at a 10% rate. The levies will take effect on Tuesday.

Although the Trump administration says the changes will boost domestic production, there will likely be wide-ranging negative consequences for the US consumer.

Economists argue supply chains will be disrupted and businesses will suffer increased costs – leading to an overall rise in prices.

Read more:
Why has Trump targeted Mexico and Canada?
Canada and Mexico hit back with retaliatory tariffs

Both Mexico and Canada rely heavily on their imports and exports, which make up around 70% of their Gross Domestic Products (GDPs), putting them at even greater risk from the new tariffs.

China only relies on trade for 37% of its economy, having made a concerted effort to ramp up domestic production, making it relatively less vulnerable.

Here we look at where US consumers will feel the biggest impact.

Avocados – and other fruit and veg

The US imports between half and 60% of its fresh produce from Mexico – and 80% of its avocados, according to figures from the US Department of Agriculture.

Canada also supplies a lot of the US’s fruit and vegetables, which are mainly grown in greenhouses on the other side of the US border.

This means that increased tariffs will quickly be passed on to consumers in the form of higher prices.

The US still grows a considerable amount of its own produce, however, so the changes could boost domestic production.

But economists warn that overreliance on domestic goods will see those suppliers increase their prices too.

Petrol and oil prices

Oil and gas prices are likely to be impacted – as Canada provides around 60% of US crude oil imports and Mexico roughly 10%.

According to the US Energy Information Administration, the US received around 4.6 million barrels of oil a day from Canada last year – and 563,000 from Mexico.

Most US oil refineries are designed specifically to process Canadian products, which would make changing supply sources complex and costly.

There has been some speculation that Mr Trump may exempt oil from the new changes – but if he doesn’t, the US could see an increase in fuel prices of up to 50 cents (40p) a gallon, economists have predicted.

Cars and vehicle parts

The US car industry is a delicate mix of foreign and domestic manufacturers.

The supply chain is so complex, car parts and half-finished vehicles can sometimes cross the US-Mexico border several times before they are ready for the showroom.

If this continues, the parts would be taxed every time they move countries, which would lead to an even bigger increase in prices.

To mitigate this, General Motors has said it will try to rush through Mexican and Canadian exports – while brainstorming on how to relocate manufacturing to the US.

Electronic goods

When Donald Trump imposed a 50% tariff on imported washing machines during his first term in 2018, prices suffered for years afterwards.

China produces a lot of the world’s consumer electronics – and smartphones and computers specifically – so the 10% tariff could have a similar effect on those devices.

The Biden administration tried to legislate to promote domestic production of semiconductors (microchips needed for all smart devices) – but for now, the US is still heavily reliant on China for its personal electronics.

This will mean an increase in prices for consumers unless tech companies can relocate their operations away from Beijing.

Boost for the steel industry

The sector that could feel the most benefit from the Trump tariffs is the steel and aluminium industry.

It has long been lobbying the government to put tariffs on foreign suppliers – claiming they are dominating the market and leaving US factories without enough business and at risk of closure.

Steel imports increasing in price would promote domestic production – and possibly save some of the plants.

But when Mr Trump increased steel tariffs during his first term, prices also increased – which business leaders said forced them to pass on costs and left them struggling to complete construction projects on budget.

Overall inflation

An increase in the prices of all these goods would inevitably lead to widespread overall inflation.

According to analysis by Capital Economics, the Canadian and Mexican tariffs would put inflation above 3% – which is much higher than the Federal Reserve’s target of 2% – and the Chinese levies would see it rise even further.

With the flick of a Sharpie marker, new tariffs on goods imported from Canada, Mexico, and China were imposed this morning and will take effect next week on February 4, 2025. According to President Trump, the tariffs are intended “to protect Americans”, though nearly all economists agree that they will result in higher prices for consumer goods and increased inflation, devaluing the US dollar.

The Trump Administration’s new 25% tariffs on goods from Canada and Mexico are larger than the 10% additional tariffs on Chinese goods, but the latter will have the biggest impact on the electric bicycle industry in the US.

Electric bicycles have grown in popularity among Americans over the last decade, offering an accessible and affordable alternative to cars and public transportation. They’ve also proven popular among recreational riders and those seeking the fun of fitness on an e-bike, which can be more enjoyable and last longer than leg-powered rides alone.

But now the US electric bike industry is bracing for potential price increases following President Trump’s new executive order imposing a 10% tariff on US imports from China. With the majority of electric bicycles and their components manufactured in China, the tariff is expected to impact both retailers and consumers, adding further strain to an industry still facing the cascading challenges of supply chain frustrations followed by overstock issues.

China dominates global e-bike production, supplying a significant portion of the US market with both complete electric bicycles and key components like motors, batteries, and controllers.

Industry estimates suggest that over 90% of e-bikes sold in the US are either fully assembled in China or contain Chinese-made parts, making them particularly vulnerable to new trade restrictions.

With an additional 10% import tariff coming into effect soon, US e-bike brands will either need to absorb the extra cost or pass it on to consumers, potentially leading to price increases across many popular models.

Make no mistake – these tariffs are not paid by Chinese exporters of electric bikes, but rather by the American companies that import them. That directly increases the cost of goods for US e-bike retailers, which usually results in increased prices.

Tariffs placed on Chinese goods, including electric bikes, are not a new phenomenon. The US e-bike industry has been navigating these tariffs since Trump’s first presidency, with those tariffs largely continuining throughout the Biden Administration from 2021 to 2025 as well, despite periods of tariff exemptions coming and going.

In the past few years, we’ve seen cases of the additional cost being passed on to consumers, but on rare occasions, we’ve also seen e-bike companies opt to absorb the increased cost and avoid raising prices.

With so much experience navigating the choppy waters of China tariffs over the last few years, many US e-bike companies have taken steps to mitigate the impact of new rounds of tariffs like these. Several major brands have been working to diversify their supply chains, moving production to other countries such as Taiwan, Cambodia, Vietnam, and other areas with favorable economic conditions or incentives.

However, shifting away from China is neither quick nor easy, as the country remains a dominant producer with established manufacturing infrastructure. E-bike importers will likely also consider applying for tariff exemptions, as was the case under previous trade restrictions. However, this is a complex and uncertain process, with no guarantees of whether or how long such exemptions could be granted.

The US has seen rapid growth in e-bike adoption, with many cities and states launching incentive programs to encourage e-bike use as a sustainable transportation alternative. Price increases caused by tariffs could slow adoption, particularly among budget-conscious consumers who rely on e-bikes as an affordable commuting solution.

As the new tariffs take effect, manufacturers, retailers, and consumers will surely be watching closely to see how the industry responds. Some companies may adjust pricing strategies, shift production, or lobby for relief, while consumers may face difficult choices between absorbing higher costs or delaying purchases.

The long-term impact of these tariffs remains uncertain, but for now, one thing is clear: some e-bikes in the US are about to get more expensive.