Over the weekend, President Donald Trump sparked a trade war with the United States’ two closest trading partners — Canada and Mexico — by threatening to lobby 25% tariffs on goods crossing the border.

Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum responded in kind.

Trump has already backed down on the tariff with Mexico following a conversation with Sheinbaum. The tariff was put on hold for a month to allow for negotiations.

Trump claims the tariffs were needed to stop the flow of deadly Fentanyl from going across the border.

Sheinbaum committed to sending National Guard troops to help, while getting Trump to concede that the U.S. needs to do a better job of preventing guns to cross the border into Mexico.

It’s unclear how much the border troops will stop the flow of Fentanyl, since most of the drug comes into the U.S. via personal cars driven by Americans.

Sheinbaum has also taken a harder line on Fentanyl-making cartels than her predecessor — and along with changes in strategy by the Biden administration — the number of overdose deaths in the U.S. has been dropping.

Even if you believe Fentanyl smuggling is the main reasons for Trump’s tariffs, that doesn’t explain the levy on Canada. Just 1% of the Fentanyl brought into the U.S. comes across the Canadian border.

Many economists are trying to figure out the endgame. That includes Jim Stanford, the director of the Centre for Future Work.

Canada doesn’t supply a lot of finished products to the U.S. so it’s not like American consumers can just avoid buying Canadian products.

“It’s actually American businesses that are going to feel the pinch first,” Stanford said. That’s what makes it so puzzling that the U.S. government would do this.”

For the auto industry, Michigan and Ontario are tightly linked, with auto parts often crossing the border several times before a car is fully built.

Right now, it remains unclear just how the tariffs will be implemented.

“You could pay a 25% tariff on the steel, and then a 25% tariff when the steel comes back in a semi finished product, and then another 25% tariff when it’s fashioned into a transmission or something, and then another 25% tariff when the finished vehicle crosses the border,” Stanford said.

“Add all that up, and it’s going to be a catastrophe for the auto industry.”

It’s possible — maybe even likely — that Trump will back off the tariffs like he did with Mexico.

However, the chaos these tariffs are causing might be the point.

“It would still be a permanent change in the outlook of business of any nationality towards where they’re going to locate their facilities,” Stanford said.

And if the tariffs are fully implemented?

“From groceries to energy to vehicles — get ready for higher prices.”