Donald Trump unleashed a barrage of tariffs against Canada, Mexico and China on Saturday, launching a fresh global trade war.<\/p>\n
The countries vowed to hit back with tariffs of their own, setting the stage for economic warfare that will reverberate across markets in the weeks ahead.\u00a0<\/p>\n
What has the US announced and why?<\/h2>\n
Washington unveiled 25 per cent tariffs on most imports from Canada and Mexico, and an additional 10 per cent levy on imports from China.\u00a0Canadian oil was hit at a lower rate of 10 per cent. The duties will take effect from Tuesday.<\/p>\n
Trump said the actions were in response to the \u201cmajor threat\u201d posed by the flow of migrants and drugs into the US across its borders with Canada and Mexico.<\/p>\n
China several years ago cracked down on entities exporting fentanyl to North America. But\u00a0Chinese groups responded by shipping the chemical ingredients \u2014 called precursor drugs \u2014 to Mexican cartels. The cartels then manufacture\u00a0fentanyl and send it across the border where it has become the leading killer of Americans aged between 18 and 45.<\/p>\n
Beijing agreed to take actions to stem the flow of precursors at\u00a0a summit between Chinese President Xi Jinping and then-US President Joe Biden in San Francisco in 2023. Critics want China to do much more.\u00a0<\/p>\n
Trump on Saturday accused the Chinese Communist party of subsidising and incentivising domestic companies to export fentanyl and precursors.<\/p>\n
How have Canada, Mexico and China responded?<\/h2>\n
Canadian Prime Minister Justin Trudeau on Saturday night announced retaliatory tariffs of 25 per cent on C$155bn (US$107bn) worth of American goods.<\/p>\n
He said the \u201cfar-reaching tariffs\u201d would hit US beer, wine, bourbon, fruit, fruit juices, perfume, clothing, shoes, household appliances, sports equipment, lumber and plastics. <\/p>\n
He added that Ottawa was also considering \u201cnon-tariff measures\u201d relating to critical minerals, in conjunction with provincial governments. <\/p>\n
Mexico also announced it would impose retaliatory tariffs on US goods without specifying the size or the targets. <\/p>\n
China has not yet made clear how it will respond to the actions. Beijing said on Sunday it \u201cfirmly deplores and opposes this move\u201d and will take \u201cnecessary countermeasures to defend its rights and issues\u201d.\u00a0<\/p>\n
US companies exported $763bn of goods to the three countries in the first 11 months of 2024 \u2014 with 17 per cent of total exports going to Canada, 16 per cent to Mexico and 7 per cent to China.\u00a0<\/p>\n
Mexico\u2019s President Claudia Sheinbaum <\/a>hinted at retaliatory tariffs late last year after Trump\u2019s initial threats. People familiar with the matter say the country has prepared what it calls \u201ccarousel\u201d tariffs where products are targeted on and off for months at a time, aimed at Republican lawmakers.<\/p>\n During a 2018 dispute in Trump\u2019s first term, Mexico targeted steel and agricultural products like pork, apples and cheese.<\/p>\n Carmakers, food producers and construction \u2014 all of which rely heavily on cross-border trade \u2014 are among the industries likely to be worst affected. <\/p>\n The US auto industry<\/a>, particularly the traditional \u201cBig Three\u201d of Ford, General Motors and Stellantis, spread manufacturing over all three countries on the continent. US automotive suppliers also make goods in Mexico, from seats to axles. About 16 per cent of the value of a US-made car is derived from work done in Mexico or Canada.<\/p>\n Carmakers with operations in Mexico and Canada will be faced with either absorbing the cost or raising prices for consumers. The import tax could give a competitive boost to South Korean and Japanese carmakers selling in the US market, said Daniel Roeska, an analyst at Bernstein.<\/p>\n Food imports from both Canada and Mexico will be heavily affected. The US imported more than $45bn in agricultural products from Mexico in 2023, according to the US agriculture department, including strawberries, raspberries, tomatoes and beef. Another $40bn came from Canada, including beef, pork, grains, potatoes and canola.<\/p>\n Construction materials will also face pressure, with about a third of softwood lumber used in the US imported from Canada. Canada and Mexico combined also account for over a fifth of US cement imports. <\/p>\n \u201cMuch of the cost increase caused by tariffs will be passed on to US consumers,\u201d said James Knightley, chief international economist at ING.\u00a0<\/p>\n The Canadian oil industry was spared the worst of Trump\u2019s tariffs, being carved out for a 10 per cent levy, as the White House sought to limit the inflationary impact on US motorists.\u00a0<\/p>\n The US relies heavily on crude imports to feed its refineries, with about 40 per cent of the crude refined in the country coming from abroad \u2014 of that, 60 per cent comes from Canada and 11 per cent from Mexico. A significant rise in the cost of crude imports would be felt at the pump. <\/p>\n Chet Thompson, head of the American Fuel & Petrochemical Manufacturers, a refining industry group, said he hoped a deal was \u201cquickly reached\u201d to end all tariffs on the industry \u201cbefore consumers feel the impact\u201d.<\/p>\n Saturday\u2019s announcement made no mention of the EU, but Trump said the previous day he \u201cabsolutely\u201d planned to target the bloc with new levies in the future. \u201cWe\u2019ll be doing something very substantial with the European Union,\u201d he said.\u00a0\u00a0\u00a0<\/p>\n The White House said the US tariffs would remain in place \u201cuntil the [immigration and drug] crisis is alleviated\u201d. But analysts said they tested the scope of presidential powers and were likely to be challenged in court. <\/p>\n Trump used the International Emergency Economic Powers Act of 1977 (IEEPA) to apply the tariffs, marking the first time the law had been used to apply levies to countries.<\/p>\n \u201cThis move is not only an aggressive tariff action in size and scope, but it is also an aggressive assertion of the president\u2019s power to impose those tariffs,\u201d said Greta Peisch, partner at law firm Wiley Rein and a former US government trade counsel. \u201cOnce again, he has broken new ground and is testing the boundaries of trade authorities delegated by Congress.\u201d<\/p>\n Trump threatened to apply broad tariffs to Mexico in 2019 over immigration issues, invoking IEEPA, but ultimately did not use them. Richard Nixon used a precursor to IEEPA, the Trading With the Enemy Act of 1917, to briefly apply tariffs of 10 per cent on US trading partners. <\/p>\n<\/div>\n\nWhat industries will be hit?<\/h2>\n
What was left out?<\/h2>\n
How long will this last?<\/h2>\n
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