According to Bloomberg, U.S. President Donald Trump said the 25% tariff imposed on Canada and Mexico will take effect on March 4 and announced an additional 10% tariff on products imported from China. This move will further exacerbate trade disputes between the United States and its major trading partners.
Trump announced on February 3 that he would suspend the full imposition of tariffs on Canada and Mexico for one month as leaders of Canada and Mexico announced new border security measures. However, Trump’s recent remarks about whether these tariffs will be imposed after the grace period ends have caused confusion in the outside world.
Trump posted on social media on February 27 that drugs from neighboring U.S. North American countries are still entering the United States “at very high and unacceptable levels.” Trump wrote: “The tariffs on the United States and Canada, which were originally scheduled to take effect on March 4, will be implemented as scheduled. China will also be subject to an additional 10% tariff on the same day.” At the same time, Trump said that the reciprocity tariffs will take effect on April 2.
New U.S. tariffs on China are also related to China’s role in fentanyl trade, levied on the basis of the 10% tariff that came into effect earlier this month, when Trump delayed tariffs on Canada and Mexico. The 25% tariff applies to all products imported from Canada and Mexico, except for energy products from Canada, which will be subject to a 10% tariff.
Trump’s potential policies put North America on the brink of a trade war again. Economists say this will hurt U.S. economic growth, exacerbate inflation, and may trigger recessions in Mexico and Canada. Mexico, Canada and China are the three largest sources of imports of goods in the United States. If the above potential tariffs come into effect on March 4, the United States will impose tariffs on more than $1 trillion of imported goods.
Trump’s latest tariff threat has shocked financial markets. After the above report was released, the US dollar rose, the Canadian dollar, the Mexican peso and the offshore yuan fell; the S&P 500 fell 1.6% as investors worry about the impact of trade barriers on the economy.
A White House official said Trump was disappointed with the outcome of security measures at the Canadian and Mexico border and believed that much of the progress came from the U.S. side. The U.S. government currently uses the number of deaths from overdose in the United States as a key indicator to measure the effectiveness of initiatives in Canada and Mexico. While Trump is optimistic about the imposition of tariffs, the official did not rule out the possibility of a deal before March 4.
Trump’s statement will certainly intensify lobbying efforts Canada and Mexico have already carried out to fight the United States for exemptions from tariffs on Canada and Mexico. Previously, concessions provided by Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum initially convinced Trump to remove tariffs at the last minute.
Claudia Sheinbaum said she would talk to Trump if necessary to prevent him from implementing the tariff policy. Meanwhile, Mexican and Canadian leaders have shown that they also threaten countermeasures if Trump continues to impose potential tariffs. Justin Trudeau reiterated the Canadian government’s plan to impose counter-tariff tariffs on US goods worth $107 billion, saying: “If the United States imposes unreasonable tariffs on Canada on March 4, we will respond extremely strongly immediately.” Justin Trudeau added: “But we don’t want to do that. We don’t want a commercial trade war between Canada and the United States.”
In recent decades, the United States, Canada and Mexico have integrated supply chains from automobiles to agricultural products, and potential new U.S. tariffs may undermine the North American trade agreement signed by Trump during his first term. According to the U.S. Department of Commerce, Canada’s trade in goods and services with the United States will be approximately $920 billion in 2023, while Mexico’s trade with the United States will be close to $900 billion.