President-elect Donald Trump has announced plans to impose tariffs on goods from Canada, Mexico, and China on his first day in office. The move is expected to disrupt global supply chains and impose significant costs on companies conducting international trade. In a post on Truth Social, Trump declared a 25 percent tariff on goods from Canada and Mexico until the flow of drugs and migrants at the border stops.
He also threatened an additional 10 percent tariff on all products from China, citing the country’s alleged involvement in shipping illegal drugs to the United States. Doug Ford, the premier of Ontario, warned that such a tariff would be “devastating to workers and jobs in both Canada and the US.” He called for Prime Minister Justin Trudeau to convene an urgent meeting with all provincial premiers. The Mexican government has condemned Trump’s tariff threats, and the Senate indicated that the country might retaliate with tariffs of its own.
China has also warned against the potential trade war, stating that “no one will win.”
Experts suggest that Trump’s tariffs could escalate into broader trade wars, which might severely affect global economies already grappling with challenges like economic downturns and unemployment. A tariff is a tax imposed on goods as they enter a country. The importing company pays this tax, not the foreign company that exports the goods.
Trump’s tariff threats impact economy
For example, a 10% tariff on a $50,000 car would result in a $5,000 charge paid by the importing company. Trump’s latest tariff announcement is in line with his economic vision and campaign pledges to prioritize American interests.
He has linked the tariffs to efforts to combat illegal immigration and drug trafficking. The announcement led to a nearly 2% increase in the value of the US dollar against the Mexican peso, and it hit a four-and-a-half-year high against the Canadian dollar. Markets in Asia and Europe experienced declines, reflecting apprehension over the proposed tariffs.
Robert Reich, a former US secretary of labor, highlighted the regressive nature of tariffs, noting their significant impact on working people. Analysts at the Peterson Institute for International Economics estimated that Trump’s proposed tariffs could cost the average US household over $2,600 annually. The future of the US-Mexico-Canada Agreement (USMCA) could be impacted by these proposed tariffs, potentially signaling Trump’s intent to renegotiate earlier than the 2026 deadline.
With a substantial portion of their exports relying on the US market, Mexico and Canada might find it difficult to counter Trump’s threats. The unfolding situation suggests a tumultuous period ahead for international trade relationships, particularly between the US, China, Mexico, and Canada.
