Trade tensions soar as China and Canada retaliate after Trump imposes new tariffs
On Tuesday, March 4, global trade tensions escalated dramatically as the United States’ new tariffs on Canada, Mexico, and China went into effect, prompting swift retaliatory actions from Beijing and Ottawa. These tariffs, some of the highest seen since the 1940s, sent shockwaves through markets in Asia and Europe.
President Donald Trump had announced 25 percent tariffs on imports from Canada and Mexico in February, accusing the countries of failing to stop illegal immigration and drug trafficking. Despite initially pausing the implementation, he followed through with the measures on Tuesday, citing a lack of progress on these fronts.
The tariffs are set to target over $918 billion in US imports from Canada and Mexico, affecting key industries such as automobiles and construction materials. In response, Canada implemented its own 25 percent tariffs on US goods, while Mexican President Claudia Sheinbaum declared that Mexico would retaliate with its own duties.
Additionally, Trump signed an order on Monday to increase a previously imposed 10 percent tariff on China to 20 percent, compounding existing levies on Chinese goods. In response, Beijing condemned the move, stating that it would impose 10 and 15 percent tariffs on various US agricultural imports.
Global Impact
The new tariffs are expected to raise prices for consumers, particularly at grocery stores. In 2023, Mexico supplied 63 percent of US vegetable imports and nearly half of US fruit and nut imports, according to the US Department of Agriculture. Housing costs could also be affected, as Canada and Mexico provide more than 70 percent of the US imports of materials like softwood lumber and gypsum, crucial for homebuilding.
Truck drivers at the Otay Mesa border crossing in Mexico reported a noticeable slowdown in business, especially for companies in the Mexican city of Tijuana that export Chinese goods. “Since the tariffs are also against China, work is going down for the (transport) companies,” said driver Angel Cervantes.
Retaliation from Canada and China
Canada’s retaliation saw 25 percent tariffs on $30 billion worth of US goods go into effect just after midnight on Tuesday. Prime Minister Justin Trudeau vowed, “Canada will not let this unjustified decision go unanswered,” and warned that additional tariffs on over $150 billion of US goods could be imposed within weeks.
China’s tariffs will take effect next week, impacting tens of billions of dollars in US imports, from soybeans to chickens. China also suspended all imports of US lumber and halted shipments of soybeans from three US exporters. Beijing’s foreign ministry stated it would fight the US trade war “to the bitter end.”
Economic Concerns
European Union trade spokesman Olof Gill expressed concern that the tariffs on Canada and Mexico could destabilize transatlantic economic relations and disrupt global trade, urging the US to reconsider.
Experts have warned that the tariffs could hurt both consumers and manufacturers. The Tax Foundation estimates that the new tariffs could reduce US economic output by 0.1 percent. Diane Swonk, chief economist at KPMG, cautioned that by 2026, tariffs could reach their highest effective rate since 1936, leading to diminished demand and potential layoffs as businesses struggle to absorb the rising costs.
While analysts suggest that Trump’s tariffs aim to address socio-economic issues, like the opioid crisis and trade imbalances, they also warn that the consequences of these actions could be far-reaching, affecting industries, workers, and global trade dynamics.
