Trump vows new tariffs on Canada, Mexico, China threaten global trade via Reuters

Written by Costas Pitas

(Reuters) – President-elect Donald Trump on Monday vowed higher tariffs on the United States’ three biggest trading partners – Canada, Mexico and China – detailing how he will fulfill campaign promises that could lead to trade wars.

Trump, who takes office on January 20, 2025, has said he will impose a 25% tariff on imports from Canada and Mexico until they crack down on drugs, especially fentanyl, and migrants crossing the border, in a move that will be seen as a violation. free trade agreement.

Trump also described “an additional 10%, on top of any additional payments” on imports from China, in one of his clearest comments on how he will implement his economic agenda since winning the November 5 election with promises to “put America first” .

“On January 20th, as one of my first Executive Orders, I will sign all necessary documents to impose a 25% Tariff on Mexico and Canada on ALL products entering the United States, and a ridiculous Open Borders,” he said in the post. in Public Truth.

While immigration arrests reached a record high during the presidency of President Joe Biden, which has clamped down on US border enforcement, illegal crossings have fallen sharply this year as Biden imposed new border restrictions and Mexico stepped up enforcement.

More than 83% of exports from Mexico will go to the US by 2023 and 75% of Canadian exports will go to this country.

Tariffs could also cause problems for overseas companies such as many Asian automakers that use Mexico as a low-cost manufacturing gateway for the US market.

The new tariffs threatened by Trump would appear to violate the terms of the US-Mexico-Canada Agreement on trade. The deal that Trump signed into law went into effect in 2020, and continued the trade deadlock between the three countries.

Canada and the United States at one point imposed sanctions on each other’s products during the tumultuous negotiations that eventually led to the USMCA. Trump will have the opportunity to renegotiate the agreement in 2026, when a “sunset” provision would force withdrawal or negotiations on changes to the agreement.

After issuing his tariff threat, Trump had a conversation with Canadian Prime Minister Justin Trudeau where they discussed trade and border security, said a Canadian source familiar with the situation.

“It was a good conversation and they will be in touch,” said the source.

Trump may be relying on the threat of tariffs to get an early renegotiation of the USMCA, said William Reinsch, former president of the National Foreign Trade Council.

“This strikes me as more of a threat than anything else,” Reinsch said. “I think the idea is if you keep hitting them in the face, eventually they will surrender.”

The leader of Mexico’s lower house Ricardo Monreal, a member of the ruling party Morena, called for “the use of bilateral methods, centers to fight human trafficking, drugs and weapons.”

“Increasing trade retaliation will hurt people’s pockets and is far from solving the root problems,” X said on social media.

Trump’s announcement sparked a dollar rally. It rose 1% against the Canadian dollar and 2% against the Mexican peso, while Asian stock markets fell, as did European equity futures. down 0.3%.[FRX/][MKTS/GLOB]

CHINA: NO ONE WINS TRADE WARS

In China, the president-elect has accused Beijing of not taking strong measures to stem the flow of illegal drugs crossing the border into the US from Mexico.

“Until that time they expire, we will impose an additional 10% tariff on China, on top of any additional tariffs, on most of its products entering the United States of America,” Trump said.

A spokesman for the Chinese embassy in Washington has responded.

“China believes that China-US economic and trade cooperation is mutually beneficial. No one will win a trade war or a tariff war,” said Liu Pengyu.

The ambassador also cited the steps that China took from the 2023 US-China meeting after which Beijing agreed to stop the export of materials related to the production of the opioid fentanyl, which is the leading cause of drug trafficking in the United States.

“All of this proves that China’s idea of ​​allowing fentanyl precursors to flow into the United States is completely contrary to facts and reality,” the spokesperson said.

Trump has previously promised to end China’s most favored trade status and tariffs on Chinese imports of more than 60% – far higher than those imposed during his first term.

China’s economy is now in a critical state given the country’s long-term decline in assets, credit risks and weak domestic demand.

Ahead of the November 5 election, Trump plans comprehensive tariffs ranging from 10% to 20% on almost all imports. He also said he would impose tariffs as high as 200% on every vehicle crossing the US-Mexico border.

He also expressed his intention to formally invoke the USMCA’s six-year review provision when he takes office. Currently, it is expected in July 2026.

Mexico’s Finance Ministry said of Trump’s tax pledge: “Mexico is the United States’ leading trading partner, and the USMCA provides a framework of certainty for national and international investors.”

Economists say all of Trump’s tax plans, possibly his most important economic policy, will raise US tariffs back to 1930s-era levels, deflate inflation, destroy US-China trade, retaliate and restructure supply chains.

They say prices are paid by companies that import products duty-free, and pass the cost on to consumers or accept a small profit.

Trump often refers to countries that pay as a result of his tariff plan, saying on Monday that Mexico and Canada “will pay a very large price.”