By Ana Swanson, Matina Stevis-Gridneff and Simon Romero
Earlier this week, President-elect Donald Trump stated he would initiate tariffs on all imports from Canada, Mexico, and China starting his first day in office, a decision that could disrupt global supply chains and impose significant expenses on businesses reliant on trade with some of the world’s largest economies.
In a post on Truth Social, Trump referenced a caravan of migrants headed to the U.S. from Mexico and indicated he would utilize an executive order to implement a 25% tariff on goods from Canada and Mexico until the flow of drugs and migrants over the border ceased.
“This Tariff will stay in effect until Drugs, especially Fentanyl, and all Illegal Aliens halt this Invasion of our Nation!” the president-elect expressed.
“Both Mexico and Canada possess the absolute right and capability to resolve this long-standing issue easily,” he continued. “We hereby insist they use this capability, and until they do, it’s time for them to bear a significant cost!”
In another post, Trump also threatened a further 10% tariff on all goods from China, alleging the country was smuggling illegal drugs into the United States.
“Chinese representatives informed me that they would enforce the highest penalty, that of death, for any drug dealers caught doing this, but, regrettably, they never followed through,” he mentioned.
Cumulatively, the tariff threats represented a severe ultimatum directed at the three largest trading partners of the United States, threatening to create chaos in America’s diplomatic and economic relationships even before Trump officially takes office.
News regarding the tariffs quickly raised alarms within the three nations, leading to a drop in the currencies of Canada and Mexico against the dollar, while a representative from the Chinese Embassy in Washington cautioned that “no one wins a trade war.”
The proposed tariffs would significantly impact U.S. industries, including automotive manufacturers, farmers, and food processors, which actively transport components, materials, and finished products across U.S. borders. Collectively, Mexico, China, and Canada account for over a third of the goods and services both imported and exported by the United States, supporting millions of American jobs.
In 2023, the three nations purchased more than $1 trillion worth of U.S. exports, while supplying nearly $1.5 trillion in goods and services to the United States.
The potential costs could be especially substantial for industries relying on the closely-knit North American market, which has been developed under a free-trade agreement for over thirty years. Imposing a 25% increase on the cost of imported goods could render many products prohibitively expensive, potentially crippling regional trade. Moreover, it might provoke retaliatory measures from other governments, which could impose their own tariffs on U.S. exports.
This in turn could lead to skyrocketing prices and shortages for consumers in the United States and beyond, alongside bankruptcies and job losses. Trump has asserted that foreign companies should shoulder the tariffs; however, these costs are actually borne by the importing company and, in many instances, passed on to American consumers.
Implementing tariffs on Canada and Mexico would also breach the stipulations of the North American trade deal that Trump endorsed in 2020, known as the United States-Mexico-Canada Agreement. This could expose the United States to legal challenges and jeopardize the agreement itself along with the trading terms it establishes for North America.
While Trump did not explicitly encourage any negotiations from Canada, Mexico, or China, he has a history of leveraging tariffs during discussions. This raises the possibility that his announcements from Monday evening were simply a starting point in what could become a prolonged negotiation.
Shortly after the president-elect’s statement, he and Prime Minister Justin Trudeau of Canada spoke for approximately two hours, initiated by Trudeau, as reported by a Canadian official with insight into the call who preferred to remain anonymous. The official noted that the discussion was constructive and centered on trade and border security.
Nevertheless, should Trump proceed with his intention to impose tariffs on Day 1, there may be limited opportunity for the negotiations necessary to postpone or mitigate the tariffs.
Canadian and Chinese officials defended their respective efforts to combat fentanyl on Monday evening and highlighted the mutual advantages of trading with the United States.
In a statement, the Canadian government aimed to emphasize the profound, inseparable connections between the two economies.
“Canada is vital to U.S. domestic energy supplies, with 60% of U.S. crude oil imports sourced from Canada last year,” stated the announcement, issued by Trudeau, the finance minister Chrystia Freeland, and public safety minister Dominic LeBlanc. It concluded, “We will certainly continue discussing these topics with the incoming administration.”
Liu Pengyu, a spokesperson for the Chinese Embassy in Washington, remarked that “the notion of China knowingly permitting fentanyl precursors to enter the United States is completely contrary to reality and facts.”
“China contends that economic and trade cooperation between China and the U.S. is mutually beneficial,” he added.
Mexican officials did not respond immediately, but the announcement likely did not catch them off guard, following Trump’s numerous warnings about imposing such tariffs. In the final days of his campaign, Trump threatened tariffs as high as 100% on all goods from Mexico.
Mexican officials had already indicated they were ready to retaliate with tariffs of their own.
“If you impose 25% tariffs on me, I must respond with tariffs,” Marcelo Ebrard, Mexico’s economy minister, remarked during a radio interview this month. “Structurally, we have the conditions to play in Mexico’s favor,” he added.
