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  • Trade wars intensify as US tariffs on Canada, Mexico, China take effect

    Trade wars intensify as US tariffs on Canada, Mexico, China take effect

    Mounting trade wars between the United States and its largest economic partners deepened on Tuesday as US tariffs on Canada, Mexico and China kicked in, sparking swift retaliation from Beijing and Ottawa.

    Steep US tariffs on Canadian and Mexican goods came into effect as a deadline to avert President Donald Trump’s levies passed without the nations striking a deal, in a move set to snarl supply chains.

    Trump had unveiled — and then paused — blanket tariffs on imports from major trading partners Canada and Mexico in February, accusing them of failing to stop illegal immigration and drug trafficking.

    In pushing ahead with the duties, Trump cited a lack of progress in tackling the flow of drugs like fentanyl into the United States.

    The duties stand to impact over $918 billion worth of US imports from both countries.

    Trump also inked an order Monday to increase a previously imposed 10 percent tariff on China to 20 percent — piling atop existing levies on various Chinese goods.

    Beijing condemned the “unilateral imposition of tariffs by the US” and swiftly retaliated, saying it would impose 10 and 15 percent levies on a range of agricultural imports from the United States, from chicken to soybeans.

    Those tariffs will come into effect next week.

    Economists caution that tariffs could raise consumer prices while weighing on growth and employment.

    Asian markets fell on opening Tuesday, with Japan’s Nikkei index dropping more than two percent and Hong Kong’s Hang Seng down 1.5 percent after Trump’s latest tariff actions.

    The Tax Foundation estimates that before accounting for foreign retaliation, tariffs on Canada, Mexico and China this time would each cut US economic output by 0.1 percent.

    And sweeping duties, particularly on Canada and Mexico, are set to upset supply chains for key sectors like automobiles and construction materials, risking cost increases to households.

    This could complicate Trump’s efforts to fulfill his campaign promises of lowering prices for Americans.

    On Monday, Trump told reporters that Canada and Mexico should “build their car plants, frankly, and other things in the United States” in order to face no tariffs.

    Former US officials see Trump’s tariffs over drugs like fentanyl as a means to tackle socio-economic problems — while providing legal justifications to move quickly.

    Washington is also seeking leverage and to rebalance trade ties, analysts say.

    But using emergency economic powers to impose tariffs on Canada, Mexico and China is a novel move, and could trigger lawsuits.

    – ‘Existential threat’ –

    Canadian Prime Minister Justin Trudeau on Monday pledged to impose retaliatory 25 percent tariffs on Washington, saying in a statement: “Canada will not let this unjustified decision go unanswered.”

    Mexican President Claudia Sheinbaum said her country has contingency plans.

    If Trump continues with his tariff plans, KPMG chief economist Diane Swonk warned ahead of them going into effect: “We could easily reach the highest effective tariff rate since 1936 by the beginning of 2026.”

    Both consumers and manufacturers stand to bear the costs of additional tariffs, which could diminish demand and trigger layoffs as businesses try to keep costs under control, she told AFP.

    Robert Dietz, chief economist at the National Association of Home Builders, told AFP the group expects a possible “combined duty tariff rate of above 50 percent on Canadian lumber” as proposed duties add up.

    Even as the United States also plans to expand forestry, Dietz said, prices will likely rise in the short-run.

    Anecdotally, some builders expect they could face higher costs of $7,500 to $10,000 per newly built single family home, he said.

    – Industry pushback –

    Trump’s doubling down on tariffs has already drawn industry pushback.

    The US-China Business Council, a group of around 270 American firms that do business in China, warned in a statement that sweeping tariffs would hurt US firms, consumers and farmers “and undermine our global competitiveness.”

    “Any use of tariffs should be strategic and targeted, focusing on specific US national security goals and unfair Chinese economic practices,” the council’s president Sean Stein said.

    The National Retail Federation, meanwhile, warned that as long as tariffs on Canada and Mexico are in place, “Americans will be forced to pay higher prices on household goods.”

    While Washington has targeted China over chemicals for illicit fentanyl, many of the components have legitimate uses, too — making prosecution tricky.

    Trudeau has said that less than one percent of the fentanyl and undocumented migrants that enter the United States come through the Canadian border.

  • Trump Announces New Tariffs on Mexico, Canada & China Over Fentanyl Crisis

    Trump Announces New Tariffs on Mexico, Canada & China Over Fentanyl Crisis

    President Donald Trump announced Thursday that the U.S. will impose a 25% tariff on goods from Mexico and Canada, effective March 4th, alongside an additional 10% duty on Chinese imports. The move, justified by Trump as a response to the continued flow of deadly drugs, particularly fentanyl, into the United States, marks a significant escalation in trade tensions.

    Speaking to reporters in the Oval Office, Trump stated that the new tariffs on Chinese imports would be added to the 10% tariff already levied on February 4th in response to the fentanyl crisis, resulting in a cumulative 20% tariff. He initially announced the new duties on his Truth Social platform, emphasizing that drugs, “namely fentanyl,” were still entering the U.S. at “very high and unacceptable levels.”

    “I don’t see that at all. No, not on drugs,” Trump responded when asked if Mexico and Canada had made sufficient progress in curbing fentanyl shipments.

    A White House official confirmed that discussions are ongoing with China, Mexico, and Canada, noting that while progress has been made on migration issues, “there are still concerns on the other issue of fentanyl deaths.”

    Implications:

    The human cost of the fentanyl crisis is undeniable. According to the Centers for Disease Control, synthetic opioids, primarily fentanyl, were responsible for 72,776 deaths in the U.S. in 2023. The emotional impact on families and communities across the nation is profound, fueling a desperate search for solutions.

    Economic Impact: These tariffs could disrupt supply chains, raise prices for consumers, and potentially harm businesses in all three countries.
    Diplomatic Relations: The move could strain relations with key trading partners and complicate efforts to address other shared challenges.
    Effectiveness: It remains to be seen whether tariffs will effectively curb the flow of fentanyl, or if they will simply shift trafficking routes and create new challenges.

    Read Also: Oil Markets Roil as Trump’s Tariffs Trigger Supply Chain Fears

    Background

    This action mirrors Trump’s previous approach of escalating tariffs during trade disputes, as seen during his first term with China. However, Chinese President Xi Jinping has so far refrained from engaging in negotiations specifically over fentanyl, opting for limited retaliatory tariffs on U.S. energy and farm equipment.

    Mexico’s extradition of drug lord Rafael Caro Quintero, convicted in 1985 for the murder of a U.S. Drug Enforcement Administration agent, highlights the ongoing efforts to combat drug trafficking.

    Trump’s decision to impose new tariffs is a high-stakes gamble that could have far-reaching consequences. While the desire to address the fentanyl crisis is understandable, the effectiveness of tariffs as a solution is questionable. The potential for economic disruption and strained diplomatic relations must be carefully weighed against the potential benefits.

  • Trump slams tariffs on Canada, Mexico, China

    Trump slams tariffs on Canada, Mexico, China

    President Donald Trump announced broad tariffs Saturday on major US trading partners Canada, Mexico and China, claiming a “major threat” from illegal immigration and drugs — a move that sparked promises of retaliation.

    Canadian and Mexican exports to the United States will face a 25 percent tariff starting Tuesday, although energy resources from Canada will have a lower 10 percent levy.

    Goods from China, which already face various rates of duties, will see an additional 10 percent tariff.

    Trump’s orders also suspended exemptions allowing low-value imports from the three countries to enter the US duty-free.

    The announcement threatens upheaval across supply chains, from energy to automobiles to food.

    Trump invoked the International Emergency Economic Powers Act in imposing the tariffs, with the White House saying “the extraordinary threat posed by illegal aliens and drugs, including deadly fentanyl, constitutes a national emergency.”

    The aim is to hold all three countries “accountable to their promises of halting illegal immigration and stopping poisonous fentanyl and other drugs from flowing into our country,” the White House added.

    China’s commerce ministry said in a statement it would take “corresponding countermeasures” and file a claim against Washington at the World Trade Organization.

    Mexican President Claudia Sheinbaum announced that her country would impose retaliatory tariffs.

    Sheinbaum said she had told her economy minister “to implement Plan B that we have been working on, which includes tariff and non-tariff measures in defense of Mexico’s interests.”

    Canadian Prime Minister Justin Trudeau — who spoke with Sheinbaum — separately said his country would hit back with 25 percent levies of its own on select American goods worth Can$155 billion (US$106.6 billion), with a first round on Tuesday followed by a second one in three weeks.

    “We’re certainly not looking to escalate. But we will stand up for Canada, for Canadians, for Canadian jobs,” he said, as he warned of a fracture in longstanding Canada-US ties.

    British Columbia Premier David Eby announced that his province would specifically retaliate against “red” US states led by members of Trump’s Republican Party.

    Trump has repeatedly expressed his approval of tariffs as a policy measure, and has signaled that Saturday’s action could be the first volley in further trade conflicts to come.

    This week, he also pledged to impose future duties on the European Union.

    He has also promised tariffs on semiconductors, steel, aluminum, oil and gas.

    “Tariffs are a powerful, proven source of leverage for protecting the national interest,” the White House said.

    – ‘Opening salvo’ –

    “The tariff action announced today makes clear that our friends, neighbors and Free Trade Agreement partners are in the line of fire,” said Wendy Cutler, vice president at the Asia Society Policy Institute and a former US trade negotiator.

    “The move today is an opening salvo on the tariff front,” she told AFP.

    Economic integration between the United States, Mexico and Canada — who share a trade pact — means stiff tariffs will have “a strong and immediate impact” in all three countries, she said.

    Imposing sweeping tariffs on the three biggest US trading partners in goods carries risks for Trump, who won November’s election partly due to public dissatisfaction over the economy.

    Higher import costs would likely “dampen consumer spending and business investment,” said EY chief economist Gregory Daco.

    He expects inflation would rise by 0.7 percentage points in the first quarter this year with the tariffs in place, before gradually easing.

    “Rising trade policy uncertainty will heighten financial market volatility and strain the private sector, despite the administration’s pro-business rhetoric,” he said.

    Economists also expect growth to take a hit.

    Trump’s supporters have downplayed fears that tariffs would fuel inflation, with some suggesting his planned tax cuts and deregulation measures could boost growth instead.

    – ‘Drive up costs’ –

    Doug Ford, premier of Canada’s economic engine Ontario, warned of potential job losses and a slowdown in business with tariffs.

    He told CNN Saturday: “We’re going to stand up for what’s right.”

    US Senate Minority Leader Chuck Schumer has warned new tariffs could “further drive up costs for American consumers.”

    Canada and Mexico are major suppliers of US agricultural products.

    The tariffs are also expected to hit the auto industry hard, since automakers and suppliers produce components throughout the region.

    Analysts have warned that hiking import taxes on crude oil from countries like Canada and Mexico threaten US energy prices too.

    Nearly 60 percent of US crude oil imports are from Canada, according to a Congressional Research Service report.