‘No room left’: Donald Trump rejects last-minute deal to avert tariffs for Canada, Mexico, hikes China levy

US President Donald Trump has shut the door on a last-minute deal to prevent sweeping tariffs on Canada and Mexico. On Monday, he confirmed there was "no room left" for the two countries to avoid the levies, causing US stock markets to slump. The duties, which take effect Tuesday, will impact more than $918 billion worth of imports from America's two biggest trading partners.

At the same time, Trump signed an order doubling tariffs on Chinese goods, raising them from 10 percent to 20 percent. The move adds to existing levies on a range of products. In response, Beijing warned it would take countermeasures to protect its interests.

Economic Fallout: Rising Costs and Job Losses

Economists warn the tariffs will push up prices for consumers while slowing economic growth and employment. According to the Tax Foundation, before factoring in foreign retaliation, the latest tariffs on Canada, Mexico, and China could each cut US economic output by 0.1 percent.


The automotive and construction industries are expected to be hit hard, with supply chains thrown into disarray. Higher costs for materials like lumber and car parts could mean steeper prices for American households. This could complicate Trump's promises of lower prices for consumers.

Trump remains firm in his stance, arguing that tariffs will drive companies to relocate manufacturing to the US. "What they'll have to do is build their car plants, frankly, and other things in the United States," he said.

Also Read: Goldman Sachs CEO says Trump tariffs are meant to 'level the playing field, but outcome is unclear'

Canada and Mexico Push Back

Canadian Prime Minister Justin Trudeau has strongly criticised the tariffs, calling them unjustified. “There is no justification for these tariffs,” he said on Monday. “Because of the tariffs imposed by the U.S., Americans will pay more for groceries, gas and cars, and potentially lose thousands of jobs. Tariffs will disrupt an incredibly successful trading relationship. They will violate the very trade agreement that was negotiated by President Trump in his last term.”

Trudeau announced that Canada would retaliate by imposing 25 percent tariffs on US goods worth $155 billion Canadian over the next 21 days. The first round of tariffs, on goods worth $30 billion Canadian, will take effect after midnight on Tuesday.

Mexican President Claudia Sheinbaum took a wait-and-see approach before Trump’s statement. “It’s a decision that depends on the United States government, on the United States president,” she said. “So whatever his decision is, we will make our decisions and there is a plan, there is unity in Mexico.”

Both Canada and Mexico have taken steps to address Trump’s concerns. Mexico deployed 10,000 National Guard troops to its northern border to curb drug trafficking and illegal immigration. Canada, despite having little fentanyl smuggling into the US, appointed a fentanyl czar.

Also Read: Canada's retaliatory tariffs on US goods to start Tuesday, Prime Minister Justin Trudeau says

Tariff Rates Could Reach 1930s Levels

Economists warn the US could see its highest effective tariff rates in nearly a century. "We could easily reach the highest effective tariff rate since 1936 by the beginning of 2026," said Diane Swonk, chief economist at KPMG.

Robert Dietz, chief economist at the National Association of Home Builders, expects the combined duty rate on Canadian lumber to surpass 50 percent. Builders predict costs for new homes could rise by $7,500 to $10,000.

Industry and Business Groups Push Back

Trump's tariff strategy has triggered resistance from businesses and industry groups. The US-China Business Council, which represents around 270 American firms with operations in China, warned that blanket tariffs would harm US companies, consumers, and farmers.

"Any use of tariffs should be strategic and targeted, focusing on specific US national security goals and unfair Chinese economic practices," said Sean Stein, the council’s president.

The National Retail Federation also warned that tariffs on Canada and Mexico would drive up the cost of household goods, forcing Americans to pay more.

Also Read: China prepares trade retaliation after US tariff hike—Who’s first in the line of fire?

The Fentanyl Factor: Justification for Tariffs?

Trump has framed some of his tariff decisions as a response to illegal drugs, particularly fentanyl. However, enforcing restrictions remains complex, as many chemical components have legal uses. Canadian Prime Minister Justin Trudeau countered Trump's claims, stating that less than one percent of fentanyl and undocumented migrants entering the US come through Canada.

As trade tensions escalate, businesses, workers, and consumers brace for the economic fallout, while Canada, Mexico, and China prepare to retaliate.