Political and business leaders are in a quandary as they weigh how to respond to President-elect Donald Trump‘s vow to impose new tariffs on imported goods from China, Mexico and Canada. Trump declared that his administration would set tariffs of 25% on Mexican and Canadian goods and 10% on Chinese manufacturers to combat what he termed an “invasion” of drugs and migrants into the United States.
“This Tariff will remain in effect until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop this Invasion of our Country! Both Mexico and Canada have the absolute right and power to easily solve this long simmering problem. We hereby demand that they use this power, and until such time that they do, it is time for them to pay a very big price!” Trump posted on Monday night on his social media site, Truth Social. A subsequent post castigated Chinese leadership for not abiding by earlier commitments to impose the death penalty on fentanyl producers in China.
If introduced, the threatened tariffs would impact the movement of goods worth $1.5 trillion-plus between Canada, Mexico and the U.S. as well as some $600 billion in trade between the U.S. and China.
U.S. stock markets remained relatively unperturbed by the President-elect’s posted remarks. The Canadian dollar lost 1% of its value relative to the U.S. dollar, the Globe and Mail reported. The U.S. dollar rose 2% against the Mexican peso.
Trump declared that he intends to exercise executive orders to sign the “necessary documents” to impose the import tariffs once he is inaugurated. However, John Veroneau a former trade negotiator under President George W. Bush, quoted in a Washington Post report, has pointed out that goods move back and forth on a duty-free basis as per the 2020 United States-Mexico-Canada Agreement (USMCA), making it likely that each country affected by Trump’s plans would retaliate with its own tariffs on U.S. goods, which would leave U.S. exporters to bear the brunt.
The USMCA replaced the 1994 North American Free Trade Agreement, which Trump had criticised in the course of his first presidential campaign. “The USMCA is the fairest, most balanced, and beneficial trade agreement we have ever signed into law. It’s the best agreement we’ve ever made,” he said in January 2020.
Mexico’s President Claudia Sheinbaum has warned that her government would retaliate with its own tariffs should Trump follow through. With around one-third of Mexico’s GDP dependent on cross-border trade with its northern neighbour, analysts contend the threatened tariff would be disastrous. Mexico also insists that it has reduced the number of U.S.-bound migrants reaching the border to the lowest in years.
Mexican exports to the U.S. include cars, machinery, electrical equipment, and food. Canada supplies oil and gas, machinery and parts and much else. The U.S. relies on China for electronics, particularly phones, along with toys, furniture and plastics.
Announcing an emergency meeting with provincial premiers, Justin Trudeau, Canada’s Prime Minister, said he and Trump had had a “good conversation” about “challenges we can work on together” after the latter’s social media posting. His Deputy Prime Minister Chrystia Freeland and Public Safety Minister Dominic LeBlanc issued a statement stressing how Canada “places the highest priority on border security and the integrity of our shared border.” Fentanyl, they added, “from China and other countries” is a “scourge” which Canadian and U.S. law enforcement agencies “work together every single day to disrupt.”
Canada’s Immigration Minister Marc Miller noted how the 23,000 migrants intercepted by US officials at the border with Canada last year amounted to little more than a “significant weekend” at the Mexican border considering that more than 1.5 million such actions were recorded there in 2023.
Canada’s Chamber of Commerce President and CEO Candace Laing said that for Trump “it’s about winners and losers – with Canada on the losing end“. She succinctly summarised the situation: “it’s time to trade ‘sorry’ for ‘sorry, not sorry‘.“
Meanwhile in Washington, a Chinese embassy spokesman insisted that anti-narcotics authorities in China and the United States collaborated closely, and that Beijing has acted against narcotics operations in cases when asked to do so by Washington.
According to a statement issued yesterday by the Chinese Foreign Ministry: “Fentanyl is an issue for the United States. In the spirit of humanity, China has given support to the United States’ response on this issue.”
