 "Tit for Tat: How China, Canada and Mexico are countering US tariffs")
A trade war looms over the world as US President Donald Trump’s long-threatened tariffs against Canada and Mexico went into effect on Tuesday (March 4).
As per the plans, all Mexican exports to the US will face a levy of 25 per cent, while most Canadian exports will face a 25 per cent tariff, with energy products facing a 10 per cent duty. A 10 per cent tariff on China — introduced last month — will be doubled to 20 per cent, according to an executive order released by the White House.
Speaking to reporters at the White House earlier, Trump said the United States has been “a laughingstock for years and years” and he needs to take trade action against its neighbours. “Very importantly, tariffs, 25 per cent on Canada and 25 per cent on Mexico, and that will start. So, they’re gonna have to have a tariff,” Trump said.
Asked if there’s anything Canada can do to try and hold off the tariffs, Trump said: “No room left for Mexico or Canada. They’re all set, they go into effect tomorrow.”
However, the three countries have expressed their displeasure at the US tariffs and promised their own countermeasures, which could not only escalate tensions between the three but also send the world’s economy into a tailspin.
Trump goes through with tariff threat
Trump’s tariffs on Canada and Mexico is the culmination of months of pressure the US has put on all three countries to do more to stop undocumented migrants and fentanyl from entering the United States. The 25 per cent tariffs on Canada and Mexico were originally scheduled to take effect in early February, but Trump paused the tariffs for 30 days after speaking with their leaders by phone. That pause expires after midnight on Tuesday.
Earlier, on February 4, Trump had imposed a 10 per cent tariff on China.
Speaking on the same on Monday, US Commerce Secretary Howard Lutnick told CNN that while Canada and Mexico had done a good job at stopping undocumented migrants from entering the United States, the two countries still needed to do more to stop the flow of fentanyl coming across the border.
The main thing that Mexico and Canada need to do is “get the [drug] cartels to stop sending in fentanyl,” Lutnick added. “He knows they’ve done a good job on the border. They haven’t done enough on fentanyl,” Lutnick said.
Trump’s tariff move led stock markets across the world to sink — the Dow Jones Industrial Average fell 649.67 points, or 1.48 per cent, the S&P 500 lost 104.78 points, or 1.76 per cent, and the Nasdaq Composite dropped 497.09 points, or 2.64 per cent, reported Reuters. The Canadian dollar and the Mexican peso also fell to their lowest levels in a month.
Even Indian shares tumbled in early trading on Tuesday, with Reuters reporting that the Nifty fell 0.20 per cent, while the BSE Sensex lost 0.18 per cent.
China hits back with counter-tariffs
Beijing wasted no time after the US announcement, announcing its own set of tariffs against the US. Also, it has placed 25 US firms under export and investment restrictions.
In a press conference, China’s finance ministry said that it would impose 15 per cent tariffs on some US agriculture imports, including chicken, wheat, corn and cotton. Moreover, it has slapped 10 per cent tariffs on other produce such as soybeans, pork, beef, fruits, vegetables and dairy products. These levies will kick in on March 10.
China’s finance ministry has also singled out 15 US companies, including drone maker Skydio, for punitive trade measures. It stated that 10 other American companies would be placed on an “unreliable entities list,” preventing them from doing business in China.
A spokesperson for China’s national legislature in the press conference added that the US was hurting itself by adding new tariffs on goods from China. “Trade between China and the United States is mutually beneficial in nature.”
In a separate statement, China’s commerce ministry said that Washington’s actions were violative of World Trade Organisation (WTO) rules. “The US’ unilateral tariffs measures seriously violate WTO rules and undermine the basis for economic and trade cooperation between China and the US. China will firmly safeguard its legitimate rights and interests.”
Canada’s reciprocal tariffs
Shortly after Trump announced his decision to go ahead with the tariffs on Canada and Mexico, Prime Minister Justin Trudeau declared that Ottawa would slap levies, saying “there is no justification” for Washington’s actions.
“Should American tariffs come into effect tonight, Canada will, effective 12:01 am EST tomorrow, respond with 25 per cent tariffs against $155 billion of American goods,” the Canadian prime minister said in a statement.
The Canadian PM explained that Ottawa would slap 25 per cent tariffs on C$30 billion worth of US goods from Tuesday, while tariffs on the remaining C$125 billion of products will come into effect in 21 days. “Our tariffs will remain in place until the US trade action is withdrawn, and should US tariffs not cease, we are in active and ongoing discussions with provinces and territories to pursue several non-tariff measures,” Trudeau added.
The BBC notes that there’s also a possibility that Canada could restrict access to energy. The Justin Trudeau-led country is the top oil supplier to the US and also provides some electricity to 30 per cent of the states.
Ontario Premier Doug Ford also told NBC that though the tariffs and the counter-measures would be “an absolute disaster” for both countries, he wouldn’t back down. “I don’t want to respond but we will respond like they’ve never seen before, adding that Michigan auto plants would likely shut down within a week and that he would halt nickel shipments and cross-border transmission of electricity from Ontario to the US. “I’m going after absolutely everything,” Ford said.
He is also prepared to follow through with his previously announced measures to counter US tariffs, which include removing American alcohol from Liquor Control Board of Ontario shelves and ripping up a $100-million deal with Elon Musk’s SpaceX for Starlink internet in remote areas.
“We’re going to use every tool in our toolbox,” he was quoted as saying to National Post. “If they want to try to annihilate Ontario, I will do everything, including cut off their energy with a smile on my face.”
Mexico’s measured stance
Without divulging too many details, Mexico, the US’ other neighbour, has also vowed that it would take steps against the tariffs levied by Trump.
Mexican President Claudia Sheinbaum said on Monday that her country has made contingency plans. “In this situation, we need composure, serenity, and patience. We have Plan A, Plan B, Plan C, and even Plan D,” she said, adding she would reveal more soon.
Experts are now in a wait-and-watch game to see how Trump’s tariffs will affect the economy, though they are certain that it will not only hurt the countries but Washington itself. As billionaire investor Warren Buffett said, “Tariffs are actually – we’ve had a lot of experience with them — they’re an act of war, to some degree.”
But it seems that Trump isn’t listening to Buffett.
With inputs from agencies
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