Trump’s tariffs could plunge both Canada and Mexico into recession.

Economists warn that Canada and Mexico could slip into recession due to tariffs that President Donald Trump is set to impose.

The US President is expected to sign executive orders today that will implement tariffs on imports from Mexico, Canada, or China. Trump has stated that a 25% tariff will be levied on goods coming from the neighbouring countries, while imports from China will face a 10% tariff.

EY’s chief economist, Greg Daco, warned that these measures could push the US into a period of stagflation—a scenario marked by stagnant economic growth alongside rising inflation. Daco estimates that US economic growth could drop by 1.5 percentage points this year, as increased import costs are likely to reduce both consumer spending and business investment.

“We have stressed that steep tariff increases against US trading partners could create a stagflationary shock—a negative economic hit combined with an inflationary impulse—while also triggering financial market volatility,” Daco noted. He further added, “Rising trade policy uncertainty will heighten financial market volatility and strain the private sector, despite the administration’s pro-business rhetoric.”

Tariffs on oil could have significant repercussions for energy prices.

Oil tariffs could have “huge implications” for US energy prices, according to the Atlantic Council think tank. Tariffs on crude oil imports from countries like Canada and Mexico may lead to significant increases in energy costs in the United States. Nearly 60% of US crude oil imports come from Canada, as noted by a Congressional Research Service report.

Canadian heavy oil, which is processed in US refineries, has few substitutes in regions that depend on it. While President Donald Trump mentioned the possibility of lowering the tariff rate on oil—potentially reducing it to as little as 10% from the announced 25%—the proposed tariffs still pose challenges. “I’m probably going to reduce the tariff a little bit on that. We think we’re going to bring it down to 10pc,” Trump told reporters.

Tom Kloza of the Oil Price Information Service explained that, although Canadian producers would face some of the tariff impacts, US refiners would also see increased costs. Following the tariff announcement, the price of oil has already reacted, with Brent crude dipping 0.3% today to under $76 per barrel.