Trump threatens China, Mexico and Canada with new tariffs
ReutersDonald Trump says he will impose new tariffs on China, Mexico and Canada on day one of his presidency Force them to crack down on illegal immigration and drug smuggling into the United States.
The US president-elect said he will sign an executive order upon taking office on January 20, 2025, to impose a 25% tariff on all goods from Mexico and Canada.
He also said that before the Chinese government cracks down on the smuggling of fentanyl into the United States, it will impose an additional 10% tariff on China.
If Trump follows through, it would mark a significant escalation in tensions with America’s three largest trading partners. It could also lead to higher prices for Americans, since tariffs are a form of import tax.
The United States is the world’s largest importing country. China, Mexico and Canada account for about 40% of the $3.2 trillion (£2.6 trillion) of goods it imports each year, according to official figures.
China has defended its efforts to stem the flow of illegal drugs and warned there can be no winner in the trade war between the two countries.
After Trump issued the tariff threat, he discussed trade and border security with Canadian Prime Minister Justin Trudeau, according to a Canadian source who spoke to Reuters. Sources said they had “good discussions.”
“Mexico is the United States’ largest trading partner, and the USMCA provides a framework of certainty for domestic and international investors,” the Mexican Treasury Department said.
These measures have the potential to disrupt global supply chains and will hit hard the three countries targeted by the tariffs.
Trump posted on his “Truth Social” platform that tariffs on Mexico and Canada will remain in place until both countries crack down on drugs (specifically fentanyl) and illegal immigration across the border.
“Both Mexico and Canada have the absolute right and authority to resolve this long-standing problem with ease,” he wrote. “It’s time to make them pay a very big price!”
In a subsequent Truth Society post, Trump attacked Beijing for failing to live up to what he said were promises made by Chinese officials to execute people caught dealing fentanyl, a synthetic opioid.
A spokesperson for the Chinese Embassy in Washington told the BBC that “the idea that China deliberately allows fentanyl precursors to flow into the United States is completely contrary to facts and reality.”
China believes that Sino-US economic and trade cooperation is essentially mutually beneficial and win-win, and no one can win in a trade war or tariff war.
The Biden administration has been calling on Beijing to do more to halt production of the ingredient fentanyl, which Washington estimates killed nearly 75,000 Americans last year.
During the campaign, Trump threatened Mexico and China with tariffs of up to 100% if he deemed necessary, far higher than those imposed during his first term.
Trump also said he would end China’s most-favored-nation trade status with the United States – the most favorable offer Washington has on tariffs and other restrictions.
Last year, more than 80% of Mexico’s exports went to the United States, while about 75% of Canada’s exports went to its larger neighbor.
Even after years of bitter trade disputes between the world’s two largest economies, the United States still accounts for about 15% of China’s exports.
How do tariffs work?
A tariff is a domestic tax levied on goods entering the country, proportional to the value of the import. Therefore, a $50,000 car imported into the United States that is subject to a 25% tariff would face a tariff of $12,500.
Tariffs are a central part of Trump’s economic vision – he sees them as a way to grow the U.S. economy, protect jobs and raise taxes.
He has previously claimed that these taxes “will not be a cost to you, but to another country.”
Economists almost universally agree that this is misleading.
This fee is actually paid by the domestic company that imports the goods, not the foreign company that exports the goods.
So, in that sense, it’s a direct tax paid by U.S. domestic businesses to the U.S. government.
Trump imposed numerous tariffs during his first term, many of which have been retained by his successor, President Joe Biden. Economic research shows that much of the financial burden ultimately falls on American consumers.
What is Trump’s strategy?
Stephen Roach, a senior fellow at the Tsai Ing-wen China Center at Yale Law School, told BBC Business the move was “clearly consistent with his campaign promise to use tariffs as a weapon to accomplish many of his policy initiatives” . Today’s show.
Trump’s pick for Treasury secretary, Scott Bessant, has previously said the president-elect’s threat to significantly increase tariffs is part of his negotiating strategy.
“My overall view is that at the end of the day he is a free trader,” Bessant said of Trump in an interview with the Financial Times before he was nominated for the post.
“It’s an upgrade to a downgrade.”
China’s economy is in a more fragile position than it was during Trump’s presidency.
China has been grappling with a series of serious problems, including an ongoing real estate market crisis, weak domestic demand and rising local government debt.
The new tariffs appear to violate the terms of the United States-Mexico-Canada Trade Agreement (USMCA).
The agreement was signed into law by Trump and takes effect in 2020. It continues a largely duty-free trade relationship between the three neighbours.
Beyond the official response from the three affected countries, reaction has been critical.
Ontario Premier Rob Ford said Trump’s planned tariffs would be “devastating to workers and jobs in Canada and the United States.”
Mexican Senate leader Gerardo Fernandez asked: “What tariffs should we impose on their (U.S.) goods until they stop consuming drugs and illegally exporting weapons to our homeland?”
North American journalist Anthony Zurcher lays out the implications of the presidential election in his twice-weekly US elections briefing. British readers can Register here. People outside the UK can Register here.
