Jessica Murphy
BBC News, Toronto

As we wait for Prime Minister Trudeau's remarks this evening, here's what two top contenders in the race to replace him have said.

Mark Carney and Chrystia Freeland - both frontrunners in the race - back a forceful response to US tariffs.

Carney, the former central banker for the UK and Canada, told BBC's Newsnight on Friday that his country is ready to "stand up to a bully".

He said the country is ready to "match dollar for dollar the US tariffs".

Freeland, the former federal finance minister, also backs a dollar-for-dollar response.

She also supports an embargo on federal agencies buying US goods and barring American firms from bidding on government contracts.

Whoever wins the Liberal leadership race on 9 March will step into Trudeau's shoes as PM.

Read more about how Canada's possible response here.

Will Grant
Reporting from Mexico City

Image source, Getty Images

All week, the Mexican President, Claudia Sheinbaum, has been bullish about the threat of tariffs from the Trump Administration. She felt confident they wouldn't be imposed, she said, and if they were, her government had a "Plan A, a Plan B and a Plan C" to deal with the fallout. The exact nature of those contingency plans would be revealed at the time, she insisted.

Well, it seems that moment the US's neighbours in North America had hoped to avoid has arrived and Mexicans - both business leaders and ordinary citizens - are looking for President Sheinbaum to reveal her hand. Most expect her to follow through with retaliatory tariffs on US products as she repeatedly said Mexico would be forced to, in the lead up to this trade dispute.

Beyond that, President Trump has tied these tariffs to the issue of fentanyl trafficking. But her administration says that the Mexican military has done a great deal on the issue - including suffering numerous casualties. The side which needs to do more, she argues, is the United States, to work harder on the demand side as the world's biggest market for illegal drugs. And, crucially, stem the tide of illegal weapons heading south, from the US, into the arms of the Mexican cartels. The two sides remain far apart on that issue.

Still, with Mexico having recently replaced China as the US's biggest trading partner, the sums involved run into the hundreds of billions of dollars of cross-border trade each year. As such, there are real life consequences in Mexico for companies big and small in this trade spat, and Mexican diplomats will be hoping to bring it to as swift a conclusion as possible.

The Canadian Chamber of Commerce released a statement ahead of what it called Trump's "profoundly disturbing decision" on tariffs.

The statement says the tariffs will have "immediate and direct consequences on Canadian and American livelihoods" and will "drastically increase the cost of everything for everyone".

"Every day these tariffs are in place hurts families, communities, and businesses," the statements adds, saying that if Trump really wanted to bring the cost down for Americans, he would instead strengthen its ties with Canada.

"If we can’t trade south, let’s diversify our trading partners and dismantle unnecessary internal trade barriers to keep goods and services flowing north, east, and west. A strong, united, and competitive Canadian economy will thrive no matter what gets thrown our way," the statement says.

Image source, Getty Images

Canadian Prime Minister Justin Trudeau is set to speak about the tariffs at 18:00 local time. You can watch his remarks by clicking "Watch Live" at the top of the page.

Trump's tariff gamblepublished at 22:44 Greenwich Mean Time 1 February

22:44 GMT 1 February

Michelle Fleury
BBC World News Correspondent

Image source, Getty Images

How far is the US willing to push its own economy just to get a dig in at others? That's the gamble being made right now.

The White house thinks it’s a pretty safe bet because, as it points out, trade is worth much less of the US’s overall GDP (24%) than of Mexico’s (73%), Canada’s (67%) and even China’s (37%).

Still, the tariffs could nudge prices higher for American consumers and businesses. And if foreign countries retaliate, the United States could see exports drop, which could slow growth.

When asked about this in the Oval Office on Friday, Trump conceded that some costs could be passed on to consumers.

"There could be some temporary short-term disruption, and people will understand that," he told reporters.

So the calculation the Trump administration and those who support import duties are making is this: With the sheer size of the American economy and its consumer base, the US can weather the storm of tariffs and whatever backlash comes with them.

In the last of five posts from the White House detailing reasons behind the tariffs, the White House accuses "the Fake News" of "already lying about the impact of tariffs."

"A 2024 study on the effects of President Trump’s tariffs during his first administration found that they “strengthened the U.S. economy” and “led to significant reshoring” in industries like manufacturing and steel production," the post on X says.

"Even former Biden Treasury Secretary Janet Yellen affirmed last year that tariffs do not harm consumers," the statement adds.

In another post on X, external, the White House states its tariffs aimed at China are also intended to address the US fentanyl crisis.

"President Trump is implementing a 10 percent tariff on China until we secure the full cooperation of the Chinese government in the fight against fentanyl," the post states. "China plays the central role in the fentanyl crisis that is destroying American lives."

The White House also alleges the Chinese Communist Party "actively helps this business."

The White House says additional tariffs on Canada will remain "until Canada cooperates with the US against drug traffickers and on border security".

"There is growing production of fentanyl in Canada, and enough fentanyl was seized at the northern border last fiscal year to kill 9.8 million Americans," a statement on X says.

"Additionally, illegal border crossings from Canada reached historic new highs every year for the last four fiscal years," the statement adds.

In a series of posts on X, the White House is laying out its justification for the tariffs.

"President Trump is implementing a 25 percent tariff to be paid for by Mexican producers until Mexico cooperates with the U.S. in the fight against drugs," one post reads., external

The White House writes that Mexican cartels are responsible for trafficking fentanyl, meth, and other drugs.

The administration hopes to use tariffs to compel the Mexican government to take more forceful action.

The White House has now confirmed President Trump is implementing a 25% tariff on imports from Canada and Mexico and a 10% additional tariff on imports from China.

"Today’s tariff announcement is necessary to hold China, Mexico, and Canada accountable for their promises to halt the flood of poisonous drugs into the United States," the White House says on X.

The order makes an exception for energy resources from Canada, which will have a lower 10% tariff.

President Trump has signed an order imposing 25% tariffs on goods imported from Canada and Mexico and a 10% tax on China, the White House has confirmed.

Energy imports from Canada will have a lower 10% tariff, a statement says.

“We don’t need their cars… I'd rather make them in Detroit.” So said the then-President-elect Donald Trump on 7 January, when asked about the US’s future trading relationship with Canada.

You won’t find a Canadian car brand on the roads, but around two million cars a year are made there domestically.

“About 1.6 million of those get exported to the US,” says Flavio Volpe of Canada’s Automative Parts Manufacturers' Association, adding that more than half of those cars are American. These include General Motors, Ford, Chrysler and Dodge.

He says that for the US to meet demand, it would have to build another 25 production plants - something that would take between 10 to 15 years and "probably bankrupt General Motors and Ford along the way”.

His message to Trump? “Grow up.”

Image source, Getty Images

Trump has repeatedly linked his tariff policy to fentanyl, a deadly synthetic painkiller, getting into the US from Canada, Mexico and China.

“The fentanyl coming through Canada is massive,” Trump recently said.

There is an opioid overdose epidemic in the US and Canada, driven in part by the availability of fentanyl.

There has been a slight decrease in opioid deaths in recent months, but the epidemic claims around 80,000 lives a year in North America.

Both the northern and southern US borders have reported drug seizures, though amounts at the border with Canada are considerably lower than those with Mexico, according to official data.

US border agents seized 43lbs (19.5kg) of fentanyl at the northern border between October 2023 and last September, compared to more than 21,000lbs at the southern border.

Still, while less fentanyl crosses from Canada, recent reports from Canadian intelligence agencies suggest there is a growing number of organised crime groups manufacturing that and other drugs in the country.

Canadian law enforcement has reported fentanyl originating from Mexican organised crime groups in the Canadian drug supply, though the, external , external“magnitude, external and nature” of the operation isn’t clear., external

Trump has discussed tariffs as a way to protect US businesses and raise money for the government. But he also sees them as a way to turn America’s economic power into a tool he can use for leverage over governments in other countries.

Nations who depend on buyers in the world’s largest economy are most vulnerable to such threats - which is one reason why Trump's targets so often seem to be close allies of the US.

Take Colombia, for example, a close ally of the US in Latin America. President Gustavo Petro said he would not accept citizens deported from America. Trump responded with a 25% tariff on all US imports of Colombia goods and threatened to raise it to 50% in a week. Colombia backed down.

With Canada and Mexico, Trump has tied his threats to issues of immigration and drug trafficking.

But there has been a lot of debate about the details of the tariff plans - how far-ranging they might be in terms of products and how quickly they might come into effect.

It may take some time before the full strategy becomes clear.

Dharshini David
Chief economics correspondent

Image source, Getty Images

What could a 25% tariff on Canadian and Mexican imports and a 10% tax on China mean for American households?

Canada and Mexico make up almost 30% of the goods that America brings in but much of the products US consumers buy are home-sourced.

If the amount of these imports sold doesn't change and those tariffs are passed on in full then the average level of American consumer prices would rise but just by between 0.5% and 0.7%.

The tariffs on Chinese imports would add less than 0.1% to shoppers’ prices.

It’s not huge, but some increases could be concentrated in very visible areas. For example, 80% of vegetables imported into the US comes from Mexico or Canada, while half of wheat products or meat are also bought in.

Of course, the shock could be far less if the whole tariff isn’t passed on to the average shopper. For example, with previous tariffs on Chinese goods much was absorbed along the supply chain or if wholesalers sourced goods from elsewhere.

Natalie Sherman
New York business reporter

I've been speaking to Yuan Ji, who is the co-founder of Erstwhile Mezcal, a small Brooklyn-based importer of mezcal and agave spirits.

As the tariff talk was bubbling last year, she decided to bring in about 30% of the bottles she expects to sell this year ahead of schedule, hoping to avoid having to raise prices on her customers in the US.

“In an ideal world, I would bring in enough to last me a year or more, but the reality is, we don’t have that much cash on hand,” she said.

“For small businesses like ourselves, it’s stressful,” she said.

Suranjana Tewari
Asia business reporter

Thousands of Asian companies including the likes of Nissan, Samsung, Honda and Foxconn moved their supply chains to Mexico and Canada in the wake of pandemic disruptions and increasing political tensions between the US and China.

At the time, it was dubbed “friendshoring”.

Today, they are bracing for the impact of trade tensions once again.

Many of them will be considering moving production, this time to the US to avoid tariffs.

But that comes with its own challenges. American workers are more expensive than Mexican workers, for example, and the US is unpredictable as an investment destination as Trump settles into the White House.

China remains the most efficient place to source tools and equipment from. Asian brands may have to contend with added duties on components they import from China too, if Trump stands by his proposed tariffs on Beijing.

Natalie Sherman
New York business reporter

Image source, Fred Sanchez/BBC

As the world braces for a formal announcement from President Trump, for small businesses it's an equally stressful time.

Bad Hombre Importing, a small California-based importer of Mexican agave-based spirits like Agua del Sol, has been working on deals to expand.

The tariffs mean founder Fred Sanchez is contemplating selling off his stock of liquor and shutting down, at least temporarily, instead.

“25% is just not something that we can realistically pass onto the consumer,” the 39-year-old says.

Sanchez believes Trump’s announcement is a kind of negotiating tactic - but no matter what happens in the end to the tariffs, he says it is already hurting his business.

“I have these pending deals in Illinois and New York and everyone is just holding their breath - they’re hesitating,” he says.

“The threat is creating uncertainty in the market and we’re not seeing the kind of investment we need to grow.”

Dearbail Jordan
Business reporter

If there is one thing that financial markets hate more than almost anything else, it’s uncertainty.

And trade wars create a lot of uncertainty.

So, how do they start?

Very simply, if the US decides to impose tariffs on goods that it buys from, for example, Canada then Ottawa can retaliate by putting border taxes on American products - it’s a “tit-for-tat” move.

It means trade between countries is disrupted which, in turn, affects global economic growth. This is especially true if the world’s two biggest economies – the US and China – slap tariffs on each other.

Tariffs can also push up inflation. If that happens, the central banks which set interest rates could decide to hold or even raise borrowing costs should inflation gather pace.

Financial markets that might have been expecting a number of interest rate cuts would face uncertainty over which way borrowing costs could go.

China has chosen its words carefully when it comes to potential tariffs by the US but has said it is "firmly committed to safeguarding national interests".

A spokesperson for Beijing's embassy in Washington says: "There is no winner in a trade war or tariff war, which serves the interests of neither side nor the world."