*

Trump likely to announce tariffs on Canada and Mexico on

Saturday, sources tell Reuters

*

Collections will start March 1, sources say

*

Action to curb fentanyl trade, illegal immigration may

earn

reprieve

*

US president also threatening 10% duties on Chinese

imports

*

Trump expected to invoke emergency powers act to back new

tariffs

(Adds White House spokeswoman's statement, paragraphs 1-5)

By Jarrett Renshaw, David Lawder and Andrea Shalal

WASHINGTON, Jan 31 (Reuters) -

U.S. President Donald Trump on Saturday will implement

tariffs of 25% on Canadian and Mexican imports and 10% on

Chinese goods with immediate effect, White House spokesperson

Karoline Leavitt said on Friday.

"The President will be implementing tomorrow 25% tariffs

on Mexico, 25% tariffs on Canada, and a 10% tariff on China for

the illegal fentanyl that they have sourced and allowed to

distribute into our country, which has killed tens of millions

of Americans," Leavitt told a White House Press briefing.

Reuters earlier quoted sources familiar with the tariff

deliberations as saying that Trump would announce tariffs on

Canadian and Mexican imports on Saturday but delay collection of

the duties until March 1 and offer a limited process for certain

imports to be exempted.

Leavitt called the report "false," but when asked about

exemptions, she said she did not have an "update or readout for

you on the exemptions." She added that the duties would be

published on Saturday and would take effect immediately.

Leavitt's comments sent

the dollar higher

, particularly against the Mexican peso and Canadian dollar,

both of which had rallied earlier following the Reuters report.

Treasury bond yields also rose, while stocks reversed course to

move lower on the day.

When Trump imposed punitive duties on Chinese good in

2018 and 2019, there was typically a lag of two to three weeks

for Customs and Border Protection to begin collecting tariffs,

due to notices required for importers.

The sources, who asked not to be named because they are

not authorized to speak publicly on the matter, had told Reuters

they hey did not have details on a final tariff rate, but noted

Trump has consistently said that he plans to impose a 25% tariff

on imports from the two countries on Saturday.

Separately, an administration official said Trump on

Friday was reviewing tariff plans, which may allow for some

exemptions. Still, any exemptions would be "few and far

between," the official said.

While the announcement of tariffs may roil financial

markets and strain the U.S. relationship with its top two

trading partners, offering a 28-day window before implementation

and possible exemptions would suggest a more careful approach by

the Trump administration.

It also would buy time for negotiations over actions by

Canada and Mexico to meet Trump's stated goals for the duties to

pressure the two U.S. neighbors to halt the flow of illegal

immigrants and deadly fentanyl opioids across the U.S. border.

DISRUPTING TRADE

Trump's punitive duties and retaliatory tariffs from Canada

and Mexico threaten to disrupt nearly $1.6 trillion in North

American trade and effectively end a 30-year free trade system

that has deeply integrated the three economies.

The U.S. president said on Thursday he still is considering

an additional 10% on Chinese imports to punish Beijing for its

alleged role in the fentanyl trade. But the sources said the

March 1 tariffs would apply only to Canada and Mexico, leaving

his plans for new China duties unclear.

Decisions on the tariffs are being managed by a core White

House team, not the incoming trade team to be led by Commerce

Department nominee Howard Lutnick and U.S. Trade Representative

nominee Jamieson Greer, a source familiar with the matter said.

Neither have been confirmed by the U.S. Senate, but the Senate

Finance Committee has scheduled a Feb. 6 confirmation for Greer.

Trump hinted about possible exemptions on Thursday when he said

he would soon decide whether to apply the tariffs to imports of

Canadian and Mexican oil, an indication that he may be concerned

about their impact on gasoline prices. Crude oil is the top U.S.

import from Canada and among the top five from Mexico, according

to U.S. Census Bureau data.

Trump trade advisor Peter Navarro told CNBC on Friday that

tariff revenue will help pay for the extension of Trump's 2017

tax cuts, which total some $4 trillion and expire this year.

Two sources familiar with the matter said that Trump was

expected to invoke the International Emergency Economic Powers

Act (IEEPA) as the legal basis for the tariffs, declaring a

national emergency over fentanyl overdoses that killed nearly

75,000 Americans in 2023 and illegal immigration.

IEEPA, enacted in 1977 and modified after the Sept. 11, 2001

attacks on the U.S., gives the president broad powers to impose

economic sanctions in a crisis.

Among the trade law tools at Trump's disposal, it would give him

the fastest path to imposing broad tariffs, as others require

lengthy investigations by the Commerce Department or USTR.

MAJOR DISRUPTION

Economists and business executives have warned that the

tariffs would spark major increases in the prices of imports

such as aluminum and lumber from Canada, fruits, vegetables,

beer and electronics from Mexico and motor vehicles from both

countries.

Tariffs are paid by firms that import goods and pass the

costs on to consumers or accept lower profits, economists say.

"President Trump's tariffs will tax America first," said Matthew

Holmes, public policy chief at the Canadian Chamber of Commerce.

"From higher costs at the pumps, grocery stores and online

checkout, tariffs cascade through the economy and end up hurting

consumers and businesses on both sides of the border."

Canadian Prime Minister Justin Trudeau on Friday said Canada

would immediately respond with forceful countermeasures, adding

"It's not what we want, but if he moves forward, we will also

act."

Canada has drawn up detailed targets for immediate tariff

retaliation, including duties on orange juice from Florida,

Trump's adopted home state, a source familiar with the plan

said. Canada has a broader list of targets that could reach

C$150 billion worth of U.S. imports, but would hold public

consultations before acting, the source said.

During Trump's first term, China targeted U.S. soybeans and

other farm products, while the European Union hit iconic

American products including bourbon whiskey and Harley-Davidson ( HOG )

motorcycles.

Mexican President Claudia Sheinbaum said she would "wait with a

cool head" for Trump's tariff decision and was prepared to

continue a border dialogue.

"We will always defend the dignity of our people, respect

for our sovereignty and a dialogue as equals without

subordination," she said.

Sheinbaum previously said Mexico also would retaliate, arguing

that Trump's tariffs would cost 400,000 U.S. jobs and drive up

prices for U.S. consumers.

Trump last Sunday waged a 10-hour trade war of words with

Colombian President Gustavo Petro, threatening the South

American country with 25% tariffs over its refusal to allow U.S.

military flights loaded with Colombian deportees. The crisis

ended when Petro agreed to accept the flights.

China has been more circumspect about its retaliation plans. Liu

Pengyu, a spokesperson for China's embassy in Washington,

emphasized China's cooperation with the U.S. on curbing fentanyl

trafficking and said he hopes the U.S. "will not take China's

goodwill for granted."