Fears are heightening over the potential of a new trade war and its possible impact across the country.

President Donald Trump has agreed to a temporary pause on the 25% tariffs he is proposing on goods from Mexico and Canada — the country’s two largest trading partners.

The Trump administration is promising to impose tariffs if the countries do not address the president’s concerns over border security and drug trafficking. The White House confirmed the pause, which allows for a period of negotiations about drug smuggling and immigration.

There is a risk that the tariffs could still come into effect, leaving the global economy uncertain about whether a crisis has been averted or whether a possible catastrophe could still be coming in the weeks ahead.

“Mexico, the U.S. and Canada together have one of the most important free trade agreements in the world, just the trade between Mexico and the U.S. amounts for $8 billion annually,” said Reyna Torres Mendivil, consul general of Mexico in Chicago. “It at the end of the day, if some measure like this passes or moves ahead, is going to be impacting the supply chain between the two countries, but also the pockets of the millions of consumers in this country and, of course, in Mexico.”

Based on 2024 job data, the Brookings Institution reported this tariff proposal could result in the loss of 177,000 jobs, rising to 400,000 job losses if Mexico and Canada choose to retaliate.

“We’re talking about a significant amount of the working-class population here in this country could be affected by the tariffs and also the people,” said Juan Gonzalez, senior research fellow at the Great Cities Institute at the University of Illinois Chicago. “I don’t think people realize to what degree Mexico is a main producer of automobiles for the United States. Mexico produced 4 million automobiles in 2024, and about half of them were American companies — General Motors, Ford and Stellantis — that are in Mexico.”

During his campaign, Trump promised voters his administration would quickly reduce inflation and “make America rich again.” However, critics say these exact proposals could have the opposite effect and increase inflation by 1%.

In a social media post Sunday, Trump said some Americans will feel “some pain” but claimed it is necessary.

Mexico said it would respond with tariffs of its own without detailing specific products. The top U.S. import commodities from Mexico are vegetables, fruit, wine, beer and snack foods.

According to the U.S. Department of Agriculture, the food-at-home (grocery store or supermarket food purchases) CPI increased 0.1% from November 2024 to December 2024 and was 1.8% higher than December 2023. In 2025, prices for all food are predicted to increase 2.2%, with a prediction interval of -0.4 to 4.9%. Food-at-home prices are predicted to increase 1.3%, with a prediction interval of -2.7 to 5.5%.

Trump and Mexican President Claudia Sheinbaum agreed to a 30-day pause on tariffs to negotiate a deal.

“Trade is very important, but also we want to make sure that our border is secure for both countries,” Torres Mendivil said. “Nobody favors drug trafficking, and that’s also something that was put on the table by President Trump. But also it’s very important that we discuss what’s happening with the illegal trade of firearms into Mexico.”

The executive order outlined several times the need for these tariffs to reduce the amount of drugs passing through the U.S. border.

“The reality is that, as we’ve seen repeatedly, illicit drugs continue to flow because there’s money to be made from it, and a lot of people are making money from them,” Gonzalez said. “So I think that the latest to control drug trafficking has to come not only on the supply side, but on the demand side as well.”

The Associated Press contributed to this report.

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