Donald Trump has been warned by officials from Mexico, Canada and China that his threat to impose hefty tariffs on goods from the three largest US trading partners would harm the economies of all involved.
In their initial responses to the US president-elect’s surprise announcement on Monday of a planned 25 per cent tariff on imports from Canada and Mexico and an additional 10 per cent levy on Chinese goods until they clamped down on illicit drugs and migrants crossing the border, leaders and other top officials urged dialogue and co-operation.
“To one tariff will come another and so on, until we put our common businesses at risk,” Mexican president Claudia Sheinbaum said during a regular press conference. Ms Sheinbaum said she planned to send a letter to Mr Trump and would seek a call with him to discuss the issue.
A Bank of Canada officia said it was clear that any move by Mr Trump to deliver on the threat would reverberate on both sides of the US’s northern border.
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“What happens in the US has a big impact on us, and something like this would clearly have an impact on both economies,” deputy governor Rhys Mendes said during an audience question-and-answer session in Charlottetown, Prince Edward Island.
Earlier, a spokesperson for China’s embassy in Washington said: “No one will win a trade war or a tariff war.”
As of September, US commerce department data showed the three countries had shipped more than $1 trillion of goods to the United States in the first nine months of the year, with Mexico ranking first, followed by China and then Canada.
Mr Trump, who takes office on January 20th, had pledged throughout his campaign to levy tariffs of varying degrees on US trading partners, part of his promise to “put America first”.
Imposing import duties was a major policy plank during his first four-year term and, like now, he has also threatened them for non-economic reasons. In 2019, he threatened 5 per cent tariffs on Mexico to achieve its co-operation in tightening border controls.
In the current case, the flow into the US of illicit drugs, particularly fentanyl, was added to his mix of grievances with the three countries. The number of US deaths from fentanyl overdoses actually declined in 2023, according to the Centers for Disease Control and Prevention, although nearly 75,000 people still succumbed to the powerful opioid.
Regarding China specifically, Mr Trump in a posting on his social media site said: “Until such time as they stop, we will be charging China an additional 10% Tariff, above any additional Tariffs, on all of their many products coming into the United States of America.”
It was not entirely clear what this would mean for China as he has previously pledged to end China’s most-favoured-nation trading status and slap tariffs on Chinese imports in excess of 60 per cent – much higher than those imposed during his first term.
Mr Trump’s threatened new tariffs would appear to violate the terms of the US-Mexico-Canada Agreement (USMCA) on trade. The deal, which Mr Trump signed into law, took effect in 2020 and continued the largely duty-free trade between the three countries, although the deal sunsets in 2026.
Mr Trump’s broadside late on Monday sent the Mexican and Canadian currencies tumbling, although US stock markets largely took the development in stride.
Shares of some companies seen as particularly vulnerable, such as automakers Ford and General Motors, fell sharply.
“Given the [social media] post [by Mr Trump] makes an explicit reference to the flow of people and drugs across the southern and northern borders, it suggests this specific tariff threat is more of a negotiating tool than a revenue raiser,” said Thomas Ryan, North America economist at Capital Economics.
“It leaves the door open to Canada and Mexico coming up with a credible plan over the next two months to try and avoid those tariffs.” – Reuters