Canada and Mexico vowed to hit back at US tariffs with tit-for-tat measures after President Donald Trump followed through on his threats of general levies of 25%, beginning a trade war that’s set to reshape global supply chains.
Canadian Prime Minister Justin Trudeau said the country will impose 25% tariffs against C$155 billion ($106 billion) of US goods, while Mexican President Claudia Sheinbaum pledged retaliatory tariffs. China vowed “corresponding countermeasures” to Trump’s 10% levy on Chinese exports without announcing any new tariffs.
Read also: Trump stretches trade law boundaries with Canada, Mexico, China tariffs — Reuters
The responses from three of America’s biggest trading partners came shortly after Trump signed orders for the US tariffs on Saturday. The measures take effect at 12:01 a.m. on Tuesday, and it’s unclear if that offers a last-chance window for a deal.
“It marks a new phase of the trade war, which targets multiple countries, including allies and China, to meet US economic and geopolitical policy goals,” said Gary Ng, senior economist at Natixis SA.
China’s Commerce Ministry pledged to file proceedings to the World Trade Organization in a Sunday statement, but stopped short of explicitly threatening counter-tariffs on US imports. President Xi Jinping’s government has in recent months been treading carefully with the US, avoiding any retaliation to trade curbs that could escalate tensions.
Trump’s tariffs deliver on a threat to punish the three countries for what he says is a failure to prevent the flow of undocumented migrants and illegal drugs, though he had also teased the possibility of a reprieve if Mexico and Canada took steps to address his concerns.
The Republican’s orders also included retaliation clauses that would increase US tariffs if the countries respond in kind. The new measures will be on top of existing trade levies on those countries.
Energy imports from Canada, including oil and electricity, will be spared from the full 25% levy and will face a 10% tariff. White House officials said that was intended to minimize upward pressure on gasoline and home-heating oil prices.
The move is explosive in scale and goes well beyond Trump’s first-term tariffs. They all but abandon the trade deal he negotiated with Canada and Mexico in his first term and will raise the cost of key goods, like food, housing and gasoline for Americans, while the overall fallout threatens to spill widely across the countries, which are the largest three sources of US imports, accounting for almost half of total volume.
Trump campaigned on a platform of extensive tariffs and he followed through, though dialing back his planned measures on China while increasing it on his neighbors. Most mainstream economists and many business groups warn that trade levies will disrupt supply chains, raise prices for consumers already wary of inflation and reduce global trade flows.
Sweeping Measures
The orders Saturday curtailed so-called de minimis exemption for small parcels and packages sent to the US from the three countries, effectively applying tariffs more widely to small shipments and potentially impacting e-commerce and online retailing, though the scope of the measure wasn’t immediately clear. The US loses a tremendous amount of tariff revenue by using the exemption, a US official told reporters on a briefing call.
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