Trump has announced he will place 25% tariffs on Canada and Mexico

"We’ll be announcing tariffs on Canada and Mexico for several reasons," Trump told reporters Thursday in the Oval Office, as he signed executive actions in response to a deadly airplane crash.

"First, it’s because of the people who have poured into our country in such an overwhelming and uncontrolled manner. Second, the drugs, including fentanyl and others, that have flooded into the country. Third, the massive subsidies we’ve been giving Canada and Mexico in the form of deficits," he explained.

Trump also escalated his warning, suggesting that the tariff levels "may or may not increase over time."

He added that he would decide on whether the tariffs would apply to Canadian oil imports as soon as Thursday evening, with the decision dependent on the price of oil.

"We don’t need the products they have. We have all the oil we need. We have all the trees we need," Trump said, referring to significant Canadian imports.

Following Trump's comments, West Texas Intermediate oil futures surged above US$73 a barrel. The U.S. dollar erased earlier losses and reached its daily high, while both the Canadian dollar and Mexican peso dropped significantly. U.S. Treasuries reduced their gains.

Canadian Dollar, Mexican Peso Drop After Tariff Remarks

Trump’s tariff announcement was closely watched by markets and global business and political leaders, who have been analyzing his actions for hints about whether these tariffs would be imposed or serve as leverage for trade negotiations.

Recently, Trump had threatened but then backed off from imposing tariffs on Colombia due to a dispute over deportations of undocumented migrants, leading some to speculate that he was using trade levies as a negotiation tool.

China Tariffs

Trump also hinted at imposing a 10 percent tariff on China, citing Beijing’s failure to stop the flow of fentanyl and related chemicals into the U.S., contributing to hundreds of thousands of deaths.

"With China, I’m considering something because they’re sending fentanyl into our country, and because of that, they’re causing us hundreds of thousands of deaths," Trump said Thursday. "So China is going to end up paying a tariff for that, and we’re in the process of doing that."

Trump has ordered his administration to investigate whether China has adhered to the terms of a trade deal from his first term, setting the stage for potential tariffs on the world’s second-largest economy.

Economic Impact of Tariffs on Canada and Mexico

Following through with tariffs on Canada and Mexico, both major trading partners and neighbors, could have significant economic repercussions, shaking markets and potentially triggering a trade war by undermining protections provided under the three-nation free trade agreement.

Both Canada and Mexico have vowed to retaliate with their own tariffs, even as their leaders work to assure the U.S. that they are addressing border concerns to ease the tension.