Trump readies sweeping new tariffs, starting with Canada

President Donald Trump’s sweeping new taxes on imports are set to take effect in a week, as the White House aims to use a historic increase in tariffs to overhaul global trading alliances.

Stock markets leaned down Friday, with all three major U.S. indexes sliding by more than 1.5 percent in early afternoon trading. Markets fell in most of Asia and Europe, as well.

The White House announced Thursday night that modified versions of the tariffs Trump initially unveiled in April would kick in on Aug. 7, giving U.S. Customs and Border Protection officials time to prepare to collect the taxes. The president has rolled out frameworks for deals with 11 of the United States’ top 15 trading partners, and he said temporary trade truces with China and Mexico would remain in effect as negotiators continue talks.

But Trump raised tariffs on some imports from Canada - the United States’ second-largest trading partner - to 35 percent Thursday, indicating little progress toward a deal with Ottawa. That took effect Friday. So far, there is no agreement with large trading partners India, Switzerland or Taiwan, either.

Importers are now paying a 10 percent levy on goods from all countries, but most products from nations that run a trade surplus with the U.S. - meaning Americans buy more goods from those countries than U.S. companies export there - will see 15 percent tariffs. For some countries, the tariffs are higher, ranging to 41 percent; in others, where negotiations have set different rates, they’re lower on specific goods.

The new tariff regime brings the tax burden on imports to 18.3 percent, according to the Yale Budget Lab, the highest mark since 1934. Entering Trump’s second term, the national tariff rate hovered between 2 and 3 percent.

Trump has long held that imposing taxes on trade will improve the nation’s grim finances and rebalance relationships with foreign nations that he says are taking advantage of the U.S.

But consumers often ultimately pay for tariffs through higher prices, and there are many nations with which the U.S. must trade to secure goods that can’t be made or grown at home. Some economists worry that Trump’s new trade policy could cause the economy to shrink and rupture certain alliances that domestic producers have relied upon to manufacture cheap goods.

“Customs and tariff revenue have already totaled more than $150 billion since President Trump took office, leading to the first June budget surplus in nearly a decade,” White House press secretary Karoline Leavitt said Thursday. “Those revenue will skyrocket even further starting tomorrow, when new reciprocal tariff rates take effect.”

So far, the economy has shrugged off much of the impact - and uncertainty - as Trump has imposed the duties, then paused them, on certain countries.

But beneath the surface, the economy has begun to show signs of slowing, with indications that the import taxes could be partially responsible. Inflation has remained persistently elevated in the Federal Reserve’s preferred measurement, and a soft jobs report Friday pointed to employers pulling back on workforce investments.

“The sectoral breakdown of the weakness, on its face, is broader than just a tariff story. It seems to be consistent with broad economic slowing, which is what we see in the GDP numbers,” said Ernie Tedeschi, director of economics at the Yale Budget Lab, and a former economic adviser in the Biden administration. “If you think that tariffs are the main culprit of the economic weakening in the first half of the year, then that’s going to affect employment across the board.”

The agreements that Trump announced over the past few months are not formal trade deals; those can take years to negotiate, with provisions to cover the smallest details of varieties of imports and tariff rates.

The president announced a wide range of tariffs on April 2, which he dubbed “Liberation Day.” Those would have raised the country’s effective tariff rate to 28 percent, according to the Yale Budget Lab.

The move staggered global markets, and Trump quickly pulled back, punting the start date for the levies for three months to allow negotiating time with foreign leaders. Since then, U.S. stock markets have rallied to new highs, essentially shrugging off the prospect of tariff rates that would have been unthinkable before Trump returned to office - although that was before the Thursday announcement.

In the meantime, the White House and Republicans turned their attention to Trump’s massive tax and immigration legislative agenda, hoping to shove the legislation that came to be known as the One Big Beautiful Bill through Congress by July 4 - and well before the August tariff deadline.

Policymakers hoped that the most populist provisions of the bill, such as ending taxes on tips, overtime wages and auto loan interest, would goose consumer spending enough to offset any pain from tariffs.

“There was kind of a singular purpose leading up to July 4 of getting that across the finish line that probably kept the focus away from tariffs a little bit and more on trying to gain an accomplishment,” said one of the White House’s corporate trade allies, who spoke on the condition of anonymity to discuss the administration’s strategy.

Trump used the newly threatened rates to try to build new leverage on trading partners with whom negotiations have not proved fruitful. In April, Trump threatened a 31 percent rate on imports from Switzerland; Thursday, he increased the Swiss rate to 39 percent.

A White House official, speaking on the condition of anonymity to candidly describe the talks, said that was because “Swiss officials were not willing to make serious concessions as it relates to their trade barriers.”

Representatives from the Swiss embassy in Washington did not immediately respond to a request for comment.

The tax on Canadian imports jumped from a 25 percent threat in April to 35 percent. Trump has voiced frustration with Canadian officials for what he has described as underinvestment in its defense industry and the country’s plan to recognize a Palestinian state in the coming months.

The tariffs could be undone by legal challenges. Trump imposed many of them using the International Emergency Economic Powers Act, or IEEPA, a 1977 statute that gives the president broad latitude to regulate international commerce during a declared emergency.

The law, though, does not mention tariffs. Groups of businesses, advocacy organizations and states have challenged Trump’s authority to levy tariffs using IEEPA. A trade court in May ruled that Trump overstepped, and after the White House appealed, another panel of judges heard arguments Thursday on the case. Experts say the question appears destined for the Supreme Court.