Trump launches trade war with China, Canada and Mexico, sparking fears for global economy
31 January 2025, 22:21 | Updated: 4 February 2025, 13:21
Donald Trump will put in place tariffs on imports from China, Canada and Mexico from Saturday, the White House has confirmed.
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The US will place 25% tariffs on goods from Canada and Mexico, its northern and southern neighbours, and 10% on China.
"Starting tomorrow, those tariffs will be in place," White House press secretary Karoline Leavitt told reporters on Friday.
"These are promises made and promises kept by the president."
The three countries are the top suppliers of goods to the US, which is also the largest importer. The tariffs are likely to result in strong price rises for Americans. Mr Trump was voted in in part as a result of the effects of inflation.
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The countries also represent huge export markets for the US, and both Mexico and Canada have vowed to retaliate - setting up a trade war.
They were previously protected by the US-Mexico-Canada free trade agreement.
Canadian Prime Minister Justin Trudea pledged to come back with an "immediate" and "forceful" response to the sanctions.
Mexican president Claudia Sheinbaum said: "We will always defend the dignity of our people, respect for our sovereignty and a dialogue as equals without subordination."
Mr Trump has also threatened to impose higher tariffs on Europe, although Ms Leavitt said he had not decided on this yet.
The World Bank warned earlier in January that if Mr Trump imposed tariffs it would slow down global economic growth, as other countries brought in their own trade barriers.
Trump insists tariffs are paid by the country they are imposed on, but this is not true - tariffs are paid by American companies that import goods and services from those countries.
The companies then usually pass their higher costs on to their consumers, which raises prices for the average American citizen.
However, they might impact Canada and Mexico too, as their products become more expensive to sell in the American market.
But Trump has showed no concern that import taxes on the United States' trading partners would have a negative impact on the US economy, despite the risk shown in many economic analyses of higher prices.
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"We don't need the products that they have," he said, speaking on Thursday. "We have all the oil you need. We have all the trees you need, meaning the lumber."
The president also said that China would pay tariffs for its exporting of the chemicals used to make fentanyl.
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Trump said Beijing has failed to prevent fentanyl and chemicals associated with the deadly drug from entering the US, which he said they promised him.
“With China, I’m also thinking about something because they’re sending fentanyl into our country, and because of that, they’re causing us hundreds of thousands of deaths,” Trump said Thursday.
“So China is going to end up paying a tariff also for that, and we’re in the process of doing that.”
The US President said he is still considering whether to include oil from those countries as part of his import taxes.
"We may or may not," Trump told reporters in the Oval Office. "We're going to make that determination probably tonight."
Trump said his decision will be based on whether the price of oil charged by the two trading partners is fair.
After he made his comments, the US dollar reached a daily high, while the Canadian dollar and Mexican peso both plunged.
The United States imported almost 4.6 million barrels of oil daily from Canada in October and 563,000 barrels from Mexico, according to the Energy Information Administration.
US daily production during that month averaged nearly 13.5 million barrels a day.
Shortly after Ms Leavitt spoke on Friday, the S&P 500 stock index sold off and largely erased its gains on the day.
Both Canada and Mexico have said they have prepared the option of retaliatory tariffs to be used if necessary, which in turn could trigger a wider trade conflict that economic analyses say could hurt growth and further accelerate inflation.
Canadian Prime Minister Mr Trudeau said on Friday that Canada is ready to respond if Mr Trump goes ahead with the tariffs, but he did not give details.
"We're ready with a response, a purposeful, forceful but reasonable, immediate response," he said.
"It's not what we want, but if he moves forward, we will also act."
Mr Trudeau said tariffs would have "disastrous consequences" for the US, putting American jobs at risk and causing prices to rise.
He reiterated that less than 1% of the fentanyl and illegal crossings into the US come from Canada.
Mexican President Ms Sheinbaum said on Friday that Mexico has maintained a dialogue with Mr Trump's team since before he returned to the White House, but she emphasised that Mexico has a "plan A, plan B, plan C for what the United States government decides".
"Now it is very important that the Mexican people know that we are always going to defend the dignity of our people, we are always going to defend the respect of our sovereignty and a dialogue between equals, as we have always said, without subordination," Ms Sheinbaum said.
Liu Pengyu, spokesman for the Chinese embassy in Washington, said the two countries should resolve their differences through dialogue and consultation.
"There is no winner in a trade war or tariff war, which serves the interests of neither side nor the world," Mr Liu said in a statement.
"Despite the differences, our two countries share huge common interests and space for co-operation."
A study this month by Warwick McKibbin and Marcus Noland, of the Peterson Institute for International Economics, concluded that the 25% tariffs on Canada and Mexico and 10% tariffs on China "would damage all the economies involved, including the US".
"For Mexico," the study said, "a 25% tariff would be catastrophic. Moreover, the economic decline caused by the tariff could increase the incentives for Mexican immigrants to cross the border illegally into the US - directly contradicting another Trump administration priority."
