 "Trump proceeds with tariffs on Canada, Mexico and China. File Image- FP")
On Saturday, Trump signed an executive order that sent shockwaves to Canada, Mexico and China. The order was to impose a whopping 25 per cent tariff on goods US imports from its North American neighbours and an additional 10 per cent tariff on Beijing, which has already been struggling with the wrath of the Americans. Trump argued that he is increasing the tariffs because the three nations led to the influx of illegal immigrants and drugs at the US border.
However, the order soon drew backlash from three nations, with Canada and Mexico already imposing retaliatory tariffs. It is also making other nations concerned about the fact that they might be next on Trump’s hit list.
While the US president managed to assert dominance by imposing these tariffs on other nations, the repercussions will be felt within the United States. Before Trump arrived, the biggest economy in the world was already struggling with the rising cost of living. The working class was disenchanted by the promises given by former US President Joe Biden’s administration. This was the reason why Trump managed to win both electoral college and popular votes in the 2024 presidential election.
However, challenges are bound to increase for working-class Americans since tariffs would make products from these nations more expensive. Not only this, it will put excessive pressure on domestic manufacturers to meet the demands. So here’s a look at how Trump’s one executive order caused a tariff war among major economies in the world.
What are the tariffs these countries are facing?
To elaborate further on this, the White House said that it would place a 25 per cent tariff on Canada and Mexico and an additional 10 per cent tariff on China. However, it remains unclear exactly how long the tariffs will be in place.
It was stated that Trump could make exceptions for certain sectors, such as oil and gas, or limit the tariffs to select groups. Before the White House announced the tariffs, some of Trump’s advisers appeared uncertain as to whether or when tariffs would be imposed. “I can’t tell you when,” Peter Navarro, Trump’s senior trade and manufacturing adviser, told NBC on Friday.
Now the question that arises is why the US imposed these tariffs on Canada, Mexico and the US. Before entering the office, Trump threatened to impose tariffs on the US’s three biggest trading partners: China, Mexico and Canada. He insisted that he would impose the tariffs until the countries deal with immigrants and illegal drugs coming into the US.
The Republican firebrand has admitted that while he sees tariffs as a powerful bargaining chip, it comes with a high price. He argued that tariffs can also put pressure on US manufacturers and importers to produce goods domestically.
“All you have to do is build your plant in the United States, and you don’t have any tariffs,” Trump has said. However, it can be hard for local manufacturers to meet the growing demands of Americans in such a short time. Not only this, importers might also push the cost of tariffs onto consumers, causing prices to rise.
The war begins
- Canada lays out the plan
Soon after Trump signed an executive order, Canadian Prime Minister Justin Trudeau held a press conference in which he announced that Ottawa would issue retaliatory tariffs. Canada went on to match the figure of 25 per cent with Trudeau emphasising how hard things will be.
On Saturday, the Canadian prime minister said that the tariffs on American goods include “immediate tariffs on $30 billion worth of goods as of Tuesday,” the day the US is set to begin collecting tariffs on Canadian goods. He insisted that the rest of the tariffs would come in about three weeks “to allow Canadian companies and supply chains to seek to find alternatives.”
“Like the American tariffs, our response will also be far-reaching and include everyday items such as American beer, wine and bourbon, fruits and fruit juices, including orange juice, along with vegetables, perfume, clothing and shoes,” the Canadian premier said. “It’ll include major consumer products like household appliances, furniture and sports equipment, and materials like lumber and plastics, along with much, much more,” he added.
A day after Trudeau’s proclamation, the Canadian federal government on Sunday, issued a full list of goods which will be subject to tariff in the first phase. These goods are worth 30 billion Canadian dollars. The list shared by the Canadian Department of Finance went on to include products such as beverages, cosmetics and paper products. In his presser, Trudeau made it clear that Canada intends to impose tariffs on an additional list of imported US products worth 125 billion Canadian dollars and assured that the additional list will be made public soon.
Mexico slammed the ‘slander’
While announcing the executive order, the White House accused the Mexican government of having an “intolerable alliance” with Mexican drug trafficking organisations. In response to this, Mexican President Claudia Sheinbaum called allegations that the Mexican government had alliances with criminal organisations a “slander”.
Sheinbaum insisted that she called on the United States to do more to clamp down on the illegal flow of arms from the south, which ultimately helped the cartels. While she noted that her country is willing to work with the US, she emphasised that “Problems are not resolved by imposing tariffs, but by talking.”
In a post on X, the Mexican president asserted that she has instructed her economy minister to respond with tariff and non-tariff measures, which are expected to include retaliatory tariffs of 25 per cent on US goods in Mexico. “We categorically reject the White House’s slander of the Government of Mexico alleging alliances with criminal organizations, as well as any intention to interfere in our territory," she wrote.
- China takes a milder route
China also “firmly opposed” the tariffs, but it’s taking a milder approach on the matter. As of now, Beijing has not announced any retaliatory measures. In regards to China, the 10 per cent tax on its import to the US will be added over and above tariffs already imposed on China by Trump in his first term and by his predecessor Biden.
“Trade and tariff wars have no winners,” said a spokesperson at China’s Washington embassy. Meanwhile, China’s Ministry of Commerce said that they will challenge the tariffs at the World Trade Organisation (WTO). It added that the additional duties would “inevitably affect and damage future bilateral cooperation on drug control”. China went on to urge Washington to engage in “frank dialogue and strengthen corporation”.
While firmly opposing the US tariffs, China pledged to launch “corresponding countermeasures” against Trump’s move. Beijing has already made it clear the influx of drugs in the country is “America’s problem”. “Fentanyl is America’s problem,” China’s foreign ministry said. “The Chinese side has carried out extensive anti-narcotics cooperation with the United States and achieved remarkable results.”
How Americans will end up paying more
A 25 per cent tariff on all imported goods from Mexico and Canada would automatically make consumer prices go up. It is pertinent to note that Canada is a major exporter of crude oil, while Mexico exports many fresh fruits and vegetables. Not only this, Mexico is also the largest auto parts exporter to the US and China is known for exporting chips used in electronic items like phones and laptops.
Hence, the prices of all the imported goods will shoot up instantly with high tariffs. The Tax Foundation, a bipartisan think tank, estimates that a 25 per cent tariff on Mexico and Canada and a 10 per cent tariff on China, as a tax, would increase overall taxes by $1.2 trillion.
Trump has celebrated the idea, insisting that the US government would receive more revenue through these tariffs. So ultimately, the tariff war would end up affecting the Americans, who were already struggling with the high cost of living.
Meanwhile, the retaliatory tariff would also force the people of Mexico and Canada to pay more for American goods. This is problematic since the economies of North America actions are “deeply integrated”.
What are Trump’s plans if all this backfires?
It is pertinent to note that an estimated $2bn worth of manufactured goods cross the borders daily. Together China, Canada and Mexico accounted for a whopping 40 per cent of imports into the US last year.
Economists have warned that the tariff war would shoot up the prices of common essential products such as cars, lumber, steel, food and alcohol. Consumers in all these nations could see an increase in the cost of living. While Trump said he is aware of the situation, he maintained that he is ready in case of retaliation.
“Today’s tariff announcement is necessary to hold China, Mexico, and Canada accountable for their promises to halt the flood of poisonous drugs into the United States,” the White House said in a statement on X on Saturday.
Meanwhile, Trump posted on his Truth Social platform: “This was done through the International Emergency Economic Powers Act (IEEPA) because of the major threat of illegal aliens and deadly drugs killing our Citizens, including fentanyl.” Not only this, he has been threatening tariffs on BRICS and EU nations as well, which might lead to a major global trading crisis.
With inputs from agencies.