Trump risks trade war as China, Canada and Mexico vow to respond to string of trade tariffs
2 February 2025, 07:10 | Updated: 4 February 2025, 13:20
China, Canada and Mexico have vowed retaliatory measures against the US after President Donald Trump placed sweeping tariffs on goods.
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Mr Trump posted on social media that the tariffs were necessary "to protect Americans," pressing the three nations to do more to curb the manufacture and export of illicit fentanyl and for Canada and Mexico to reduce illegal immigration into the US.
The action fulfilled one of Mr Trump's commitments to voters, but threw the global economy and the new president's political mandate to lower prices into turmoil.
In response to the measures, both Canada and Mexico said they were also preparing similar tariffs on US goods, while China confirmed it would take "necessary countermeasures to defend its legitimate rights and interests".
Canadian Prime Minister Justin Trudeau on Saturday said Canadian duties on 30 billion dollars (£24 billion) worth of trade in American alcohol and fruit will take effect on Tuesday when the US tariffs go into effect.
He opened his address to Canadians with a message aimed at American consumers.
"It will have real consequences for you, the American people," he said, saying it would result in higher prices on groceries and other goods.
Mr Trudeau channelled the views of many Canadians who were feeling betrayed by their neighbour and long-time ally, reminding Americans that Canadian troops fought alongside them in Afghanistan.
"The actions taken today by the White House split us apart instead of bringing us together," Mr Trudeau said, warning in French that it could bring about "dark times" for many people.
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Mexican President Claudia Sheinbaum said she had instructed her economy secretary to implement a response that includes retaliatory tariffs and other measures in defence of Mexico's interests.
"We categorically reject the White House's slander that the Mexican government has alliances with criminal organisations, as well as any intention of meddling in our territory," Ms Sheinbaum wrote in a post on X.
"If the United States government and its agencies wanted to address the serious fentanyl consumption in their country, they could fight the sale of drugs on the streets of their major cities, which they don't do and the laundering of money that this illegal activity generates that has done so much harm to its population."
Mr Trump's order includes a mechanism to escalate the rates if the countries retaliate against the US.
The tariffs risk an economic standoff with America's two largest trading partners Mexico and Canada, upending a decades-old trade relationship with the possibility of harsh reprisals by those two nations.
The tariffs could cause inflation to significantly worsen, possibly eroding voters' trust that Mr Trump could deliver his promise to lower the prices of groceries, gas, housing, vehicles and other goods.
Mr Trump declared an economic emergency in order to place duties of 10% on all imports from China and 25% on imports from Mexico and Canada.
Energy imported from Canada, including oil, natural gas and electricity, would be taxed at a 10% rate.
The tariffs would go into effect on Tuesday, setting a showdown in North America that could potentially sabotage economic growth.
A new analysis by the Budget Lab at Yale laid out the possible damage to the US economy, saying the average US household would lose the equivalent of 1170 dollars (£943) in income from the taxes.
The premier of the Canadian province of British Columbia, David Eby, called on people to stop buying liquor from US "red" states and remove American alcohol brands from government store shelves as a response to the tariffs.
In a televised message, Mr Eby deemed the Trump administration's decision as "a declaration of economic war against a trusted ally and friend" and that he will stand up for his citizens and all Canadians in general.
"Effective today, I have directed BC liquor sales to immediately stop buying American liquor from red states," he said.
"Liquor store employees will be removing the most popular of these brands from government store shelves."
A senior US administration official, insisting on anonymity to brief reporters, said the lower rate on energy reflected a desire to minimise any disruptive increases in the price of gas or utilities.
That is a sign White House officials understand the gamble they are taking on inflation. Price spikes under former president Joe Biden led to voter frustration that helped to return Mr Trump to the White House.
The order signed by Mr Trump contained no mechanism for granting exceptions, the official said, a possible blow to homebuilders who rely on Canadian lumber as well as farmers, automakers and other industries.
The order would also allow for tariffs on Canadian imports of less than 800 dollars (£645).
Imports below that sum are currently able to cross into the United States without customs and duties.
