President Donald Trump has initiated tariffs against Canada and Mexico, causing concern in global markets. These tariffs had been threatened for a long time and are now in effect. The move is expected to trigger costly retaliatory actions from the United States’ North American allies.
As of past midnight, imports from Canada and Mexico will face a 25% tax. Additionally, Canadian energy products will be subjected to a 10% tariff. Furthermore, the 10% tariff imposed by Trump on Chinese imports earlier this year has been increased to 20%.
Canadian Prime Minister Justin Trudeau has announced that Canada will impose tariffs on more than $100 billion worth of American goods over a three-week period in response. However, Mexico and China have yet to disclose their plans for retaliatory measures.
The U.S. president’s moves raised fears of higher inflation and the prospect of a devastating trade war even as he promised the American public that taxes on imports are the easiest path to national prosperity. He has shown a willingness to buck the warnings of mainstream economists and put his own public approval on the line, believing that tariffs can fix what ails the country.
“It’s a very powerful weapon that politicians haven’t used because they were either dishonest, stupid or paid off in some other form,” Trump said Monday at the White House. “And now we’re using them.”
The Canada and Mexico tariffs were originally supposed to begin in February, but Trump agreed to a 30-day suspension to negotiate further with the two largest U.S. trading partners. The stated reason for the tariffs is to address drug trafficking and illegal immigration, and both countries say they’ve made progress on those issues. But Trump has also said the tariffs will only come down if the U.S. trade imbalance closes, a process unlikely to be settled on a political timeline.
There is the possibility of the tariffs being short-lived if the U.S. economy suffers, just as there is the possibility of more tariffs to come on the European Union, India, computer chips, autos and pharmaceutical drugs, as Trump has promised. The American president has injected a disorienting volatility into the world economy, leaving it off balance as people wonder what he’ll do next.
“It’s chaotic, especially compared to the way we saw tariffs rolled out in the first (Trump) administration,” said Michael House, co-chair of the international trade practice at the Perkins Coie law firm. “It’s unpredictable. We don’t know, in fact, what the president will do.”
Democratic lawmakers were quick to criticize the tariffs, but even some Republican senators raised alarms.
Sen. Susan Collins, R-Maine, said she’s “very concerned” about the tariffs going into effect because of her state’s proximity to Canada.
“Maine and Canada’s economy are integrated,” Collins said, explaining that much of the state’s lobsters and blueberries are processed in Canada and then sent back to the U.S.
The world economy is now caught in the fog of what appears to be a trade war.
Even after Trump announced Monday that the tariffs were going forward, Canadian officials were still in touch with their U.S. counterparts.
“The dialogue will continue, but we are ready to respond,” Canadian Defense Minister Bill Blair said in Ottawa as he went into a special Cabinet meeting on U.S.-Canada relations. “There are still discussions taking place.”
Shortly after Blair spoke, Trudeau said Canada would put 25% tariffs against $155 billion Canadian ($107 billion U.S.) of American goods, starting with tariffs on $30 billion Canadian ($21 billion U.S.) worth of goods immediately and on the remaining amount on American products in three weeks.
“Our tariffs will remain in place until the U.S. trade action is withdrawn, and should U.S. tariffs not cease, we are in active and ongoing discussions with provinces and territories to pursue several non-tariff measures,” Trudeau said.
To resolve the tariffs being imposed Tuesday, the White House would like to see a drop in the seizures of fentanyl inside the United States, not just on the northern and southern borders. Administration officials say that seizures of fentanyl last month in everywhere from Louisiana to New Jersey had ties to foreign cartels.
Damon Pike, technical practice leader for customs and trade services at the tax and consulting firm BDO, suggested that how other countries respond to the tariffs with their own import taxes could escalate the tensions and possibly increase the economic pain points.
“Canada has their list ready,” Pike said. “The EU has their list ready. It’s going to be tit for tat.”
The Trump administration has suggested that inflation will not be as bad as economists claim, saying that tariffs give a reason for foreign companies to open factories in the United States. On Monday, Trump announced that Taiwan Semiconductor Manufacturing Company, the computer chipmaker, would be investing $100 billion in domestic production.
Still, it can take time to relocate factories spread across the world and train workers with the skills they need.
Greg Ahearn, president and CEO of The Toy Association, said the 20% tariffs on Chinese goods will be “crippling” for the toy industry, as nearly 80% of toys sold in the U.S. are made in China.
“There’s a sophistication of manufacturing, of the tooling,” he said. “There’s a lot of handcrafting that is part of these toys that a lot of people don’t understand … the face painting, the face masks, the hair weaving, the hair braiding, the cut and sew for plush to get it to look just so. All of that are very high hands, skilled labor that has been passed through generations in the supply chain that exists with China.”
For a president who has promised quick results, Ahearn added a note of caution about how quickly U.S. factories could match their Chinese rivals.
“That can’t be replicated overnight,” he said.
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Gillies reported from Toronto. Associated Press writers Anne D’Innocenzio in New York and Lisa Mascaro in Washington contributed to this report.
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