US trade partners warn Trump’s tariffs will hurt everyone involved via Reuters

(Reuters) – Officials in Mexico, Canada and China have warned US President-elect Donald Trump that US President Donald Trump’s threat to impose steep tariffs on goods from America’s three biggest trading partners will hurt the economies of all parties involved and will risk deflation and hurt labor markets.

In their first round of response to Trump’s surprise announcement on Monday of 25% tariffs on goods from Canada and Mexico and an additional 10% tariff on Chinese goods until they crack down on illegal drugs and migrants crossing the border, leaders and other top officials. called for dialogue and cooperation.

“One tax will come another and another, until we put our normal businesses at risk,” Mexican President Claudia Sheinbaum said during a press conference. Sheinbaum said he plans to send a letter to Trump and will seek a phone call with him to discuss the issue.

Meanwhile, the head of the Bank of Canada, said it is clear that any move by Trump to bring about this threat will backfire on both sides of the northern border with the US.

“What happens in the US has a big impact on us, and something like this obviously has an impact on both economies,” said Deputy Governor Rhys Mendes during a question-and-answer session with the audience in Charlottetown, Prince Edward Island.

Earlier, a spokesman for the Chinese embassy in Washington said: “No one will win a trade war or a tariff war.”

As of September, data from the US Commerce Department showed that the three countries exported more than $1 trillion in goods to the United States in the first nine months of the year, with Mexico ranking first, followed by China and then Canada.

FOCUS ON FENTANYL

Trump, who takes office on January 20, had pledged throughout his campaign to impose different tariffs on US trading partners, as part of his pledge to “put America first.”

Tariffs were a major policy plank during his first four-year term and, now, he has threatened them again for non-economic reasons. In 2019, he threatened 5% tariffs on Mexico to gain its cooperation in strengthening border controls.

In the current situation, the entry into the US of illegal drugs, especially fentanyl, has been added to his mix of complaints with three countries. The number of people who died in the US due to fentanyl overdoses actually decreased in 2023, according to the Centers for Disease Control and Prevention, although about 75,000 people still succumbed to the powerful opioid.

Regarding China specifically, Trump in a social media post said: “Until that time they stop, we will charge China an additional 10% tariff, on top of any other Tariff, on most of their products entering the United States.” American.”

It was not clear what this would mean for China as he had previously promised to end China’s most favored nation trade status and tariffs on Chinese imports of more than 60% – far higher than those imposed during his first term.

The new tariffs threatened by Trump will appear to violate the terms of the US-Mexico-Canada Agreement (USMCA) on trade. The agreement, which Trump signed into law, went into effect in 2020 and continued free trade between the three countries, although the agreement expires in 2026.

Warren Murayama, who was the US Trade Representative under President George HW Bush, said that Trump’s threat can be easily implemented by making a national emergency declaration, which will activate the International Emergency Economic Powers Act.

“If precedent is any indication, it’s an uphill battle,” countering the actions taken under that banner.

Trump’s broadside late Monday sent Mexican and Canadian currencies lower, although U.S. stock markets took the development lightly, as many investors saw it as opening a bid for the nomination rather than certainty.

Shares of some companies that seemed particularly vulnerable, such as automakers Ford (NYSE: ) and General Motors (NYSE: ), fell sharply.

“Since the document clearly refers to the movement of people and drugs across the southern and northern borders, it suggests that this tax threat is more of a negotiation tool than a revenue raiser,” said Thomas Ryan, North America Economist at Capital Economics. .

“It leaves the door open for Canada and Mexico to come up with a credible plan in the next two months to try to avoid those costs.”