- Canada, Mexico slapped with 25% duties; China gets 10% above current tariffs
- Trump wants action on staunching flow of fentanyl and migrants to the US
- Canadian oil to be taxed at 10%, more oil and gas tariffs expected in mid-Feb
President Donald Trump announced broad tariffs Saturday on major US trading partners Canada, Mexico and China, citing 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% tariff starting Tuesday, although energy resources from Canada will have a lower 10% levy.
Goods from China, which already face various rates of duties, will see an additional 10% tariff, said Trump.
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.
Washington additionally accused Mexico’s government of having an “intolerable alliance” with drug trafficking groups.
Mexican President Claudia Sheinbaum shot back, accusing Trump of “slander” and announcing 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.”
Trump has repeatedly expressed his approval of tariffs, and has signaled that Saturday’s action could be the first volley in further trade conflicts to come.
This week, he pledged to impose duties on the European Union in the future.
He has also promised tariffs on semiconductors, steel, aluminum, as well as 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.
She noted that Canada and Mexico will face domestic pressure to retaliate.
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, 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.
‘Canada to hit retaliatory tariffs’
Canada will hit back at US tariffs with 25% levies of its own on select American goods, Prime Minister Justin Trudeau said in a dramatic tone as he warned of a fracture in longstanding Canada-US ties.
“Canada will be responding to the US trade action with 25% tariffs against Can$155 billion ($106 billion) worth of American goods.”
The first round of tariffs would target Can$30 billion worth of US goods on Tuesday followed by further tariffs on Can$125 billion worth of products in three weeks.
“We’re certainly not looking to escalate. But we will stand up for Canada, for Canadians, for Canadian jobs,” Trudeau said.
The tariffs will apply to “everyday items” such as American beer, wine and bourbon as well as fruits, vegetables, consumer appliances, lumber and plastics, he added — “with much, much more.”
Trudeau said the trade conflict will have “real consequences” for Canadians but also for Americans, including job losses, higher costs for food and gasoline, potential shutdowns of auto assembly plants, and impeded access to Canadian nickel, potash, uranium, steel and aluminum.
Canada and Mexico are major suppliers of US agricultural products.
The tariffs are also expected to hit the auto industry hard, with automakers and suppliers producing 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% of US crude oil imports are from Canada, noted a Congressional Research Service report.
