Following his 2024 re-election, Donald Trump initiated a series of aggressive trade penalties against Canada and Mexico to pressure those nations on border security and drug trafficking. This sparked a volatile cycle of retaliatory levies and legal challenges that strained the North American economic alliance throughout early 2026.
The 25 per cent 'fentanyl tariffs' and the February 1st order
The conflict began when Donald Trump signed an order on February 1st imposing a blanket 25 per cent tariff on all imports from Canada and Mexico. According to the report, these duties—known as the IEEPA or fentanyl tariffs—were designed to force a halt to the flow of illegal migrants and fentanyl into the United States. A slightly lower rate of 10 per cent was applied specifically to energy products, which began taking effect on February 4th.
The immediate reaction from Canada, led by Prime Minister Justin Trudeau, involved counter-tariffs and the strategic removal of American alcohol products from provincial liquor stores. While Donald Trump briefly paused these measures for one month after Ottawa promised tighter border security, the move established a pattern of "escalation and temporary pause" that defined the first quarter of the year.
The $29.8 billion Canadian retaliation and Ontario's electricity surcharge
Trade tensions intensified on February 10th when Donald Trump announced 25 per cent tariffs on all steel and aluminum imports, removing previous exemptions for Canada and Mexico.. As the report says, these sector-specific duties took effect on March 12th, prompting Canada to launch a second wave of retaliation targeting $29.8 billion in U.S. goods.
The friction extended to sub-national governments, specifically when Ontario Premier Doug Ford implemented a 25 per cent surcharge on electricity exports to the United States. This provincial move nearly triggered a doubling of the steel and aluminum tariffs by the Trump administration, though the threat subsided after Doug Ford suspended the electricity tax.
CUSMA exemptions and the April 2nd 'Liberation Day' global regime
The automotive industry became the next battleground on March 26th, with Donald Trump announcing 25 per cent tariffs on all auto imports effective April 3rd. However, these levies included exemptions for content produced under the Canada-U.S.-Mexico Agreement (CUSMA). In response, Canada's new Prime Minister, Mark Carney, vowed to impose matching levies on vehicles that did not comply with the agreement.
On April 2nd, an event dubbed "Liberation Day," Donald Trump expanded his trade offensive into a global regime. This included a baseline 10 per cent duty on all imports, with significantly higher rates for countries with trade surpluses, such as 34 per cent for China and 20 per cent for the European Union. Notably, these specific global baseline measures did not apply to Canada or Mexico, suggesting a tiered approach to international trade pressure.
The May 28th ruling on the International Emergency Economic Powers Act
The legal viability of this trade strategy faced a critical setback on May 28th. The U.S. court of International Trade ruled that the broad-based tariffs imposed by Donald Trump under the International Emergency Economic Powers Act (IEEPA) exceeded his executive authority. This ruling effectively challenged the legal foundation of the administration's use of national security emergency powers to dictate trade terms.
Despite this judicial blow, significant uncertainty remains. It is still unknown whether the U.S.. Supreme Court will overturn the May 28th decision or if the administration will pivot to a different legal mechanism to maintain the tariffs. Furthermore, while the report details the U.S. and Canadian perspectives, the specific long-term retaliatory strategy of the Mexican government remains less detailed than the Canadian response.
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