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Donald Trump imposes tariffs but Canada and Mexico hit back

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  • Post last modified:February 2, 2025

US President Donald Trump has announced sweeping new tariffs on all goods imported from America’s three largest trading partners, China, Mexico and Canada. Trump said the US would impose tariffs beginning on Tuesday of 25% on Canada and Mexico, and 10% on China. Canadian energy faces a lower 10% tariff. He had threatened to impose the import taxes if the three countries did not address his concerns about illegal immigration and drug trafficking.

Both Canada and Mexico said they are preparing retaliatory tariffs of their own. Together, China, Mexico and Canada accounted for more than 40% of imports into the US last year.

Trump has indicated he is ready to escalate the duties if the countries retaliate. A tariff is a domestic tax levied on goods as they enter the country, proportional to the value of the import. They are a central part of Trump’s economic vision.

In her response, Mexican President Claudia Sheinbaum called allegations that the Mexican government had alliances with criminal organisations “slander”. The White House, in its announcement, accused Mexico’s government of having “an intolerable alliance” with Mexican drug trafficking organisations.

In a statement, Sheinbaum called on the US to do more to clamp down on the illegal flow of guns south to arm the cartels. Her country is willing to work with the US, she said. “Problems are not resolved by imposing tariffs, but by talking.”

Canadian Prime Minister Justin Trudeau said his country will also respond. “We don’t want to be here, we didn’t ask for this,” he said in a news conference late on Saturday. “But we will not back down in standing up for Canadians.”

China said in a statement that it is strongly dissatisfied with the levies and “firmly opposes” them. The auto sector could be especially hard hit. Auto parts cross the three borders multiple times before a final vehicle is assembled. TD Economics suggest the average US car price could increase by around $3,000.

Economists say the tariffs and subsequent retaliation could raise prices on a wide range of products, from cars, lumber, and steel to food like frozen French fries, avocados, and tomatoes, to alcohol. The Canadian Chamber of Commerce released a statement saying tariffs will have “immediate and direct consequences on Canadian and American livelihoods” and will “drastically increase the cost of everything for everyone”.

US industry groups have also raised alarm bells. The National Homebuilders Association said the levies could increase housing costs. The Farmers for Free Trade said, with many US farmers already struggling, “adding tariffs to the mix would only exacerbate the situation across much of rural America”.

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