Trade War Looms: Trump Set to Impose 25% Tariffs on Canadian and Mexican Imports
Background
Companies, consumers, and farmers across North America braced on Friday for U.S. President Donald Trump to impose 25% tariffs on Canadian and Mexican imports within hours. The move could disrupt nearly $1.6 trillion in annual trade.
Trump’s Demands
Trump has set a Saturday deadline to impose the punitive duties over his demands that Canada and Mexico take stronger action to halt the flow of illegal immigrants and the deadly opioid fentanyl and precursor chemicals into the U.S.
Industry Reactions
Industry groups are furiously seeking any scrap of information on how Trump plans to implement the tariffs, whether he would impose the full 25% with immediate effect, or announce them and delay their implementation to allow some time for negotiations over steps that the countries could take.
Tariff Revenue
Trump’s top trade advisor, Peter Navarro, said that tariff revenue will help pay for the extension of Trump’s 2017 tax cuts, which total some $4 trillion and expire this year.
Legal Basis for Tariffs
Two sources familiar with the matter said that Trump is expected to invoke the International Emergency Economic Powers Act (IEEPA) as the legal basis for the tariffs, declaring a national emergency over fentanyl overdoses that killed nearly 75,000 Americans in 2023 and illegal immigration.
Trade War Risks
Imposing the duties would tear up a 30-year free trade system that has built a highly integrated North American economy, with auto parts sometimes crossing borders several times before final assembly. Economists and business executives have warned that the tariffs would spark major increases in the prices of imports such as aluminum and lumber from Canada, fruits, vegetables, beer, and electronics from Mexico, and motor vehicles from both countries.
Canada’s Response
Canada has drawn up detailed targets for immediate tariff retaliation, including duties on orange juice from Florida, Trump’s adopted home state, a source familiar with the plan said. Canada has a broader list of targets that could reach C$150 billion worth of U.S. imports, but would hold public consultations before acting.
Mexican Response
Mexican President Claudia Sheinbaum has said Mexico also would retaliate, arguing that Trump’s tariffs would cost 400,000 U.S. jobs and drive up prices for U.S. consumers. However, she has recently expressed doubt that Trump will follow through on his pledge to impose the tariffs.
Conclusion
The threat of tariffs has sparked a chorus of warnings from industry groups, economists, and business leaders, who fear that the move could have far-reaching consequences for the U.S. and global economies. As the world waits with bated breath for Trump’s decision, one thing is clear: the stakes are high, and the consequences of inaction could be severe.
FAQs
Q: What are the tariffs?
A: The tariffs are a 25% duty on Canadian and Mexican imports, imposed by the U.S. President Donald Trump.
Q: Why is Trump imposing the tariffs?
A: Trump is imposing the tariffs to pressure Canada and Mexico to take stronger action to halt the flow of illegal immigrants and the deadly opioid fentanyl and precursor chemicals into the U.S.
Q: What are the potential consequences of the tariffs?
A: The tariffs could lead to major increases in the prices of imports, including aluminum and lumber from Canada, fruits, vegetables, beer, and electronics from Mexico, and motor vehicles from both countries.
Q: How will the tariffs affect the U.S. economy?
A: The tariffs could have far-reaching consequences for the U.S. economy, including job losses, reduced economic growth, and higher inflation.