Trade Wars Intensify as U.S. Tariffs on Canada, Mexico and China Take Force
Mounting trade wars between the United States and its largest economic partners deepened on Tuesday as U.S. tariffs on Canada, Mexico and China kicked in, sparking swift retaliation from Beijing and Ottawa.
Steep U.S. tariffs on Canadian and Mexican goods came into effect as a deadline to avert President Donald Trump's levies passed without the nations striking a deal, in a move set to snarl supply chains.
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Trump had unveiled—and then paused—blanket tariffs on imports from major trading partners Canada and Mexico in February, accusing them of failing to stop illegal immigration and drug trafficking.
In pushing ahead with the duties, Trump cited a lack of progress in tackling the flow of drugs like fentanyl into the United States.
The duties stand to impact over $918 billion worth of U.S. imports from both countries.
The Tax Foundation estimates that before accounting for foreign retaliation, tariffs on Canada, Mexico and China this time would each cut U.S. economic output by 0.1%.
And sweeping duties, particularly on Canada and Mexico, are set to upset supply chains for key sectors like automobiles and construction materials, risking cost increases to households. This could complicate Trump's efforts to fulfill his campaign promises of lowering prices for Americans.
On Monday, Trump told reporters that Canada and Mexico should "build their car plants, frankly, and other things in the United States" in order to face no tariffs.
Former U.S. officials see Trump's tariffs over drugs like fentanyl as a means to tackle socioeconomic problems while providing legal justifications to move quickly.
Washington is also seeking leverage and to rebalance trade ties, analysts say. But using emergency economic powers to impose tariffs on Canada, Mexico and China is a novel move, and could trigger lawsuits.
Canadian Prime Minister Justin Trudeau on Monday pledged to impose retaliatory 25% tariffs on Washington, saying in a statement: "Canada will not let this unjustified decision go unanswered." Mexican President Claudia Sheinbaum said her country has contingency plans.
If Trump continues with his tariff plans, KPMG chief economist Diane Swonk warned ahead of them going into effect: "We could easily reach the highest effective tariff rate since 1936 by the beginning of 2026."
Both consumers and manufacturers stand to bear the costs of additional tariffs, which could diminish demand and trigger layoffs as businesses try to keep costs under control, she said.
