WASHINGTON
US President Donald Trump’s tariffs are fueling global trade tensions, as Canada, Mexico, and China’s statements on retaliating against Washington’s decisions give rise to concerns over trade wars in global markets.
Trump’s 25% tariffs on imports from Canada and Mexico went into effect on Tuesday, citing the flow of undocumented migrants and alleged fentanyl trafficking into the US for these tariffs.
The US’ existing tariffs on China were doubled from 10% to 20% at the same time.
The Trump administration officials said the tariffs on Canada and Mexico derive from their efforts in an alleged “drug war” the US is facing, rather than a trade war, while pointing to April 2 for other tariffs on trade.
Trump also repeatedly said he would impose reciprocal tariffs if countries issued retaliatory tariffs.
The US’ trade with Canada, Mexico, and China accounts for over 40% of its total trade. Tariffs on the country's major trading partners, as well as subsequent retaliatory measures, have jeopardized the US's trade with these countries, which is worth approximately $2.2 trillion.
Last year, the US’ trade with Mexico reached $840 billion, $506 billion of which was imports and $334 billion was exports, while the trade deficit between the two countries totaled $172 billion, according to the US Department of Commerce.
Canada’s exports to the US reached $413 billion, while US imports to Canada totaled $349 billion, as the trade volume came in at $762 billion, registering a $63 billion trade deficit.
The US’ imports from China reached $439 billion, while exports to China totaled $144 billion—as the US-China trade volume reached $582 billion, the trade deficit between the two countries exceeded $295 billion.
The US ran a trade deficit of $531 billion with these three large trade partners.
Additionally, Trump eyes the EU for tariffs on items such as automobiles, medicine, and chips. As Trump is poised to impose a 25% tariff on the EU, he also announced the imposition of a 100% tariff on BRICS countries if they create a currency to replace the US dollar.
Economists warn that such aggressive trade decisions could have dire consequences, such as triggering global inflation. Trump’s tariffs on Canada, Mexico, and China will cost the average US household over $1,200 per year, according to the Peterson Institute for International Economics (PIIE).
Steven Kamin, senior fellow at the American Enterprise Institute (AEI), said in a statement that tariffs could cause both inflation and contraction in the economy, as inflation will be led by the higher cost of imports of both final and immediate products, resulting in higher production costs and a reduction in real household income, while supply chains will be disrupted and a greater uncertainty will emerge over future tariffs, which would lead to contraction.
Kamin stated that the estimates of the direct impact of tariffs on inflation are around 0.5 to 0.75 percentage points spread over a year or two. However, in the event of recent rises in inflation rendering businesses and workers more sensitive to prices compared to before, a longer period of higher inflation may be on the horizon.
He also mentioned that the escalation of trade tensions could have broader geopolitical and economic consequences, such as the reorganization of the supply chain and the establishment of new trade partnerships and alliances, while the possible termination of the US-Mexico-Canada Agreement would result in reduced cooperation among North American nations.
- Trump’s decisions, countries’ retaliations in February
In chronological order, the White House issued the “America First Trade Policy” presidential action on Jan. 20 to outline the new administration’s policy priorities, instructing federal agencies to investigate unfair trade practices by April 1.
Trump signed an executive order on Feb. 1 to impose 25% tariffs on Canadian and Mexican imports to the US, as well as 10% tariffs on China. A lower tariff of 10% was applied to Canadian energy imports, and reports said these would come into effect on Feb. 4. The order also stated that tariffs would be further increased if countries were to retaliate.
Canadian Prime Minister Justin Trudeau said the country would impose a 25% retaliatory tariff on imports worth 155 billion Canadian dollars ($107.7 billion). These imports include alcoholic beverages, fruit juice, vegetables, perfumes, clothing, footwear, household appliances, furniture, sporting goods, lumber, and plastics.
Mexican President Claudia Sheinbaum instructed her economy minister to implement a “Plan B” of tariffs and other measures to protect Mexico’s interests in response to Trump’s tariffs.
On Feb. 2, Beijing announced that it would take measures against Trump’s decision, filing a complaint with the World Trade Organization.
The next day, Trump introduced a one-month suspension to impose 25% tariffs on Mexico in exchange for increased border security, as well as a similar waiver to Canada for border security.
Trump’s 10% tariff on Chinese products went into effect on Feb. 4, and in response, Beijing announced 10% tariffs on some products from the US, including crude oil, agricultural equipment, high-emission vehicles, and pickup trucks, and an additional 15% tariff on coal and natural gas imports.
The Chinese Ministry of Commerce said the exports of critical minerals like tungsten, tellurium, bismuth, and molybdenum to the US would be controlled. China also put US apparel group PHV and biotech firm Illumina on its blacklist and launched a probe into Google for violating anti-monopolization regulations.
On Feb. 10, Trump signed an executive order to impose 25% tariffs on steel and aluminum imports, targeting all countries indiscriminately, set to come into effect on March 12.
Trump unveiled his plan to impose reciprocal tariffs on targeted countries that retaliate against US tariffs on Feb. 13.
The following day, the EU said it would respond immediately and harshly to these reciprocal tariffs.
On Feb. 21, Trump signed an executive order to consider retaliatory steps against governments imposing digital services taxes on US enterprises while restricting Chinese investment in US technology, critical infrastructure, health care, agriculture, energy, raw materials, and other strategic sectors.
The president instructed the US Department of Commerce to launch an investigation into copper imports on Feb. 25.
- White House executive orders, developments in March so far
Trump’s 25% tariffs on Canada and Mexico, which were suspended for a month, went into effect on March 4, while the 10% tariff on China was increased to 20%.
Beijing imposed additional tariffs on certain agricultural and food products from the US while announcing further sanctions and bans on American companies.
Meanwhile, Canadian Prime Minister Justin Trudeau stated that the US launched a trade war against Canada, noting that Ottawa would impose equivalent tariffs on goods worth $30 billion immediately and those worth $125 billion in 21 days, totaling $155 billion.
Sheinbaum stated that Mexico will respond to the US tariffs and other non-tariff policies with new measures to be announced on Sunday.
