U.S. President Donald Trump announced this Friday his plans to impose tariffs on several of the country’s main trading partners, a move that threatens to trigger a wave of retaliatory measures and usher in a new era of global trade wars. This Saturday, he will impose a 10% tariff on China and a 25% tariff on products from Mexico and Canada, both of which have already announced they will respond with similar initiatives. He also plans sectoral tariffs on products such as copper and steel, as well as duties on goods from the European Union.
Trump has acknowledged that his plans will cause “short-term disruptions” in the markets but downplayed the consequences. “The American people will understand,” he assured in statements from the Oval Office during the signing of the appointment of the new Secretary of the Interior, Doug Burgum. The tariffs, he insisted, will help the U.S. reduce its trade deficits and “will make us very rich and very strong.”
The first to be affected will be China, the U.S.’s main rival, along with Mexico and Canada, Washington’s partners in the North American trade agreement (USMCA). When asked whether these three countries could avoid the tariffs by taking last-minute action, the Republican president responded with a firm “no.” He justifies the measure by arguing that these three nations contribute to the flow of fentanyl into U.S. territory, where more than 100,000 people die each year from the consumption of this opioid. Additionally, he believes that Mexico and Canada do not take sufficient measures to control irregular migration at their borders and maintain an unfair trade relationship with the U.S.
The tariffs, he specified, “are not a negotiation tool. It’s pure economics. We have huge deficits with all three countries. In one case (China), they send enormous amounts of fentanyl that kill hundreds of thousands of people a year. In the other two cases (Mexico and Canada), they allow that poison to enter the U.S.” by failing, in his opinion, to intercept it at their respective borders.
Regarding the 25% tariffs against Canada, he is considering a possible exception: Canadian oil could be subject to only a 10% tax. Canada is the U.S.’s main foreign supplier of oil, particularly for Midwestern states, and accounts for 60% of U.S. crude imports.
Trump has also declared that he is willing to impose tariffs on the countries of the European Union, Washington’s main trading partner, arguing that the bloc has treated the U.S. unfairly. “They don’t accept our cars, they don’t accept our agricultural products, they barely accept anything,” he complained this Friday. “We have a huge deficit with the European Union. So we are going to take very substantial action against the EU.”
The timeline for imposing tariffs on European products is still unclear. Shortly before, White House spokeswoman Karoline Leavitt stated in her regular press briefing that the president does not yet have a schedule for this measure. Leavitt also declined to specify whether the president is considering broad tariffs against the EU as a whole or if he would apply them country by country.
The Republican president does have a timeline in mind for sectoral tariffs: February 18 for oil and gas, “this month or next” for steel and aluminum, and copper “will take longer.” He also plans to impose tariffs on semiconductors and pharmaceutical products.
Trump’s threats to impose tariffs on goods from neighboring countries and USMCA trading partners had already put U.S. businesses and consumers on high alert due to the likelihood of drastic price increases on various products, from avocados to gasoline, lumber, and vehicle components. By making imports more expensive, the final price for consumers inevitably rises.
This could trigger a return of inflation, the major economic issue that hurt American consumers during Joe Biden’s presidency. Although inflation was eventually brought under control, it played a significant role in the Democrats’ electoral defeat last November. During his campaign, Trump promised measures that would lower prices from his first day in office.
Mexico and Canada have indicated that if Trump follows through with his threats, they will take their own measures to impose tariffs on U.S. goods in response. “We have a response ready. A firm, strong, but reasonable and immediate response. It’s not what we want, but if he moves forward, so will we,” Canadian Prime Minister Justin Trudeau said this Friday. “I won’t sugarcoat it. Our country is going to face difficult times in the coming days and weeks,” he added in an interview with Canadian television.
A trade war between North American countries would have consequences not only for their respective markets but also for the entire continent and the world. Trade between the U.S. and Mexico in the first 11 months of 2024 was approximately $776 billion. Between the U.S. and Canada, it was about $700 billion. A report from the Peterson Institute for International Economics (PIIE) estimates that the 25% tariffs against Mexico and Canada would reduce economic growth and increase inflation in all three nations. “By the end of Trump’s second term, the real U.S. GDP would be about $200 billion lower than it would have been without the tariffs,” the study states.
The U.S. president had been wielding the threat of tariffs against these partners since his election campaign and had continued to promise them before taking office. Faced with the threat of rising costs, U.S. businesses had developed contingency plans: In December, imports of goods surged dramatically, according to Commerce Department data, in an apparent attempt to stockpile supplies before the tariffs took effect.
Consumers have also been trying to get ahead of rising prices. Official data shows a recent increase in purchases of goods such as television screens, which Mexico is a major exporter of.
Trump first proposed tariffs on Mexican and Canadian products last November after winning the presidential election. At the time, he emphasized that he would implement them on his first day in office. In response to the threat, Mexico’s President Claudia Sheinbaum spoke with Trump by phone, and Canadian Prime Minister Justin Trudeau traveled to Mar-a-Lago to meet with him—an action that drew harsh criticism in his own country. Despite positive remarks about these conversations, after taking office on January 20, Trump maintained his tariff threat but postponed it to February 1.
Uncertainty over what would happen on Saturday persisted throughout the week. On Wednesday, Trump’s nominee for Secretary of Commerce, Howard Lutnick, stated during his confirmation hearing that Mexico and Canada could avoid the tariffs set to take effect this Saturday if they took action against drug trafficking. However, the banker clarified that other rounds of tariffs would be decided by the end of March or April.