WASHINGTON — President Donald Trump said he would follow through on his threat to impose 25% tariffs on imports from Canada and Mexico on Feb. 1, citing the flow of fentanyl and large trade deficits as among the reasons for his decision.

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

“Number one is the people that have poured into our country so horribly and so much. Number two are the drugs, fentanyl and everything else that have come into the country. Number three are the massive subsidies that we’re giving to Canada and to Mexico in the form of deficits,” he said.

West Texas Intermediate oil futures climbed above $73 a barrel following the comments. The U.S. dollar wiped out an earlier loss to touch the day’s high after the remarks, while the Canadian dollar and Mexican peso both plunged. U.S. Treasuries pared their gains.

Trump indicated the 25% rate could represent a floor, saying that the tariff levels “may or may not rise with time.”

But the U.S. president did suggest he was still considering if one significant import — oil — would be exempted. Trump said would be making a determination as soon as Thursday evening, basing his decision upon the price of oil.

“We don’t need the products that they have. We have all the oil that you need. We have all the trees you need,” Trump added, referring to major imports from Canada.

Trump’s move was closely anticipated by markets as well as global business and political leaders who have scrutinized his words and actions for any indication on whether the U.S. president would deliver on his levy threats or use them as the starting point for negotiations on trade.

Trump in recent days threatened and then pulled back on tariffs against Colombia in a dispute over deportations of undocumented migrants, leading some to speculate that he was using trade levies merely as leverage to seek policy concessions.

China tariffs

Trump also indicated that he would proceed with tariffs on China. He didn’t specify the levy, though he’s previously said it would be 10%. Trump has said Beijing failed to follow through on promises to prevent fentanyl and the chemicals used to make the deadly drugs from flowing into the U.S.

“With China, I’m also thinking about 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 also for that, and we’re in the process of doing that.”

Trump has ordered his administration to investigate whether China complied with a trade deal struck during his first term, setting the stage for tariffs against the world’s second largest economy.

Following through on tariffs against Canada and Mexico, who are U.S. neighbors, major trading partners, and export markets, threatens to have dramatic economic consequences, rattle markets and potentially launch a trade war by undermining protections from a three-nation free trade agreement.

Both countries have pledged to respond to any trade levies, including with retaliatory tariffs, even as their leaders sought to assure the U.S. they were addressing border concerns in a bid to defuse the conflict.

“If these tariffs go into effect, Canada will respond,” Canadian Ambassador to the U.S. Kirsten Hillman said Thursday. “This is not something that we want to do. We do not want to get into a tariff-back-and-forth with the United States. It’s not good for Canada, Canadians and Canadian workers and it’s not good for the United States, Americans and American workers.”

Hillman said that Canada has responded to Trump’s concerns about the border by clamping down and announcing new security measures, including added drones and helicopters.

Canadian Prime Minister Justin Trudeau visited Trump at his Mar-a-Lago resort even before the president was inaugurated in a bid to ease tensions between their nations, and Mexican President Claudia Sheinbaum spoke to Trump to try to avert the levies.

In the first 11 months of 2024, U.S. trade with Canada totaled $699 billion and $776 billion with Mexico. And the magnitude of tariffs Trump will enact could have stark impacts on particular industries, such as the auto industry and the energy sector. Shares of U.S. automakers Ford Motor Co. and General Motors Co. turned negative on the announcement, erasing earlier gains.

“President Trump’s tariffs will tax America first,” Matthew Holmes, executive vice president at the Canadian Chamber of Commerce, said Thursday. “From higher costs at the pumps, grocery stores and online checkout, tariffs cascade through the economy and end up hurting consumers and businesses on both sides of the border. This is a lose-lose.”

Further levies

Trump is also promising sectoral tariffs, such as on pharmaceuticals, semiconductor chips, steel, aluminum and copper, which could apply widely to many countries, including Canada and Mexico.

The U.S. president is an avowed believer in tariffs, saying they will force a renaissance in domestic manufacturing, though industry groups warn that it will upend supply chains and endanger existing factories by raising costs of source materials.

He’s hailed tariffs as a source of revenue as lawmakers move to renew and expand expiring tax cuts and approve other credits and benefits the president promised on the campaign trail. Trump wants to reduce the corporate rate to 15% for firms that manufacture goods in the U.S., compared to the current 21% rate.

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(With assistance from Saleha Mohsin, Sydney Maki, Ryan Beene, Simon Casey and Randy Thanthong-Knight.)

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