Despite the bluster, Trump forced to U-turn after Mexico, Canada retaliate while China doesn't even blink
Written by Aljazeera, Finance Twitter
Trump makes U-turn on Canada, Mexico tariffs
US president Donald Trump reversed course on planned tariffs on imports from Canada and Mexico, delaying their implementation by one month.
Trump over the weekend issued executive orders for a 25pc tariff on all imports from Mexico, a 25pc tariff on non-energy imports from Canada, a 10pc tax on Canadian energy imports and a 10pc tariff on all imports from China, all to be effective on 4 February.
But Trump delayed the tariffs on Mexico and Canada by a month and has indicated that tariffs on China likewise could be subject to negotiations with Beijing.
Trump's decision-making on Mexico and Canada tariffs so far looks like a signature move from his first term — escalatory rhetoric and action followed by de-escalation after extracting concessions that do not appear to be significant.
Trump said today he agreed to postpone the implementation of tariffs on Mexican goods after receiving assurances from Mexico president Claudia Sheinbaum that she would immediately reinforce the shared border with 10,000 national guard troops.
Trump also cited similar assurances from Canadian prime minister Justin Trudeau.
"As President, it is my responsibility to ensure the safety of ALL Americans, and I am doing just that," Trump said via his social media platform. "I am very pleased with this initial outcome."
In both cases, the border security pledges touted by Sheinbaum and Trudeau recast initiatives already planned or underway.
Trump told reporters today he would "be speaking to China probably over the next 24 hours" — likely meaning the country's president Xi Jinping. Unlike Mexico and Canada, China has taken a restrained stance to Trump's announcement of tariffs. Like the US immediate neighbors, China already has been taking steps to cut off the illegal manufacturing and exports of precursors for fentanyl — the pretext for Trump's tariffs.
Things can only get bitter
The announcement of tariffs that would have directly hit US energy trade will leave many in the industry scratching their heads about Trump's future moves. A major trade war that would have severely curtailed the flow of energy and other commodities across North America is averted for now, but Trump is signaling that tariffs remain a key plank on his policy agenda.
Trump has shrugged off any negative impacts on the US energy sector and the broader economy, saying over the weekend that "WE WILL MAKE AMERICA GREAT AGAIN, AND IT WILL ALL BE WORTH THE PRICE THAT MUST BE PAID." In remarks to reporters today, Trump pushed back against criticism of negative impacts of his tariffs.
"Very simply, every single country that you're writing about right now is dying to make a deal," Trump said.
In the immediate term, the Trump administration will hold high-level talks with the governments of Mexico and Canada against the deadline for the delayed imposition of tariffs.
But down the line, there are other motivations for Trump to move forward with tariffs against key US trading partners. Trump today once again decried the "massive deficits" the US has in trade with Canada, Mexico, China, the EU and the UK. And then there is the lure of tariff revenue that Trump — with an eye toward upcoming congressional deliberation of extending tax cuts beyond 2025 — says would be sufficient to offset lower personal and corporate taxes.
Trump set a 1 April deadline for US government agencies to prepare a report on "unfair trade practices" by key US trading partners, which would kick off a legal process for imposing tariffs in the following two months. Trump is separately planning to review the US-Mexico-Canada free trade agreement that his first administration negotiated in 2019.
Unlike the tariffs that were due to be imposed on Tuesday by an executive order, the broader plan for tariffs scheduled to kick in after 1 April would be harder to reverse or to negotiate away.
And his first two weeks in office show that, despite his claim to be championing America's "energy dominance", the US energy industry would not be exempt during the upcoming trade wars. - https://www.aljazeera.com/
Tariffs War 2025 Begins – Why Canada & Mexico Are More Upset & Angrier Than China With Trump’s Trade War
With friend like the United States, Canadians and Mexicans do not need enemies. President Donald Trump has finally made good on a campaign promise to raise tariffs on almost everyone – both friends and foes. First, he slapped a 25% tariff on all goods imported from Canada and Mexico, except Canadian oil and energy products, which will face a 10% tariff.
Then, he imposed duties of 10% on all Chinese goods coming into the country. Now, Mr Trump says U.S. tariffs on imports from the E.U. “will definitely happen”. Last year, the U.S. ran a deficit of US$213 billion (£173 billion) with the European Union. Even closest ally Britain isn’t spared, as Trump said the U.K. is “out of line”, even though the US doesn’t run as high a trade deficit with Britain.
While Europe has started to panic and running around like a headless chicken after Trump’s threat, it was neighbouring Canada and Mexico that are extremely mad and furious. On the contrary, China, supposedly the biggest threat to the U.S. – militarily, economically and politically – was quite relaxing and has no plan to retaliate in kind for the time being.
As President Trump triggers a trade war with Canada, Mexico and China – the country’s three largest trading partners, accounting for more than a third of the products brought into the United States – the world is waiting to see the type of damages, which would not only hit the U.S. income, hurt employment and increase inflation, but also spark global recession and even depression.
Canada and Mexico’s strategy is to hopefully force Trump to make a U-turn by making Americans feel the pain too. Preparing to retaliate, outgoing Canadian Prime Minister Justin Trudeau said his country would impose 25% tariffs on more than US$105 billion of U.S. goods. Warning the impact of American jobs in auto and manufacturing industries, he said – “We didn’t ask for this, but we will not back down,”
A second wave on an additional US$85 billion of American goods would include tariffs on cars and trucks, agricultural products, dairy products, steel and aluminum and aerospace products. It’s not hard to understand why Canada is aggressively fighting back. As the U.S. most exposed trading partner, Canada could easily plunge into a painful economic recession if Trump’s tariffs continue for months.
The trade war between Canada and the U.S. has spread to average Joes and Janes where Canadians are feeling a sense of betrayal. Trudeau reminded Americans that Canadian troops fought alongside them in Afghanistan and helped respond to many disasters in the U.S., including wildfires in California and Hurricane Katrina, whilst Canadian hockey fans booed the American national anthem at two National Hockey League games.
Already, calls for a boycott of American products has started. Provinces of Ontario, British Columbia, Quebec, Manitoba and Nova Scotia planned to remove American liquor brands from store shelves. From Colgate toothpaste to California wine, a plan has begun to put “Made in Canada” tags alongside Canadian products at supermarkets to discourage buying American products.
But Canada can’t fight the U.S. alone. Trudeau has roped in Mexican President Claudia Sheinbaum to work together. Sheinbaum said Mexico’s response will include tariff and non-tariff measures. Her plan is to slap tariffs on specific U.S. goods from Republican strongholds. Mexican citizens in the U.S., as well as other Latinos, have decided to boycott American products too.
Organizers of movement such as “Freeze Latino Movement”, for example, have called on the entire Latino community to stop shopping at commercial chains like Walmart and Costco, as well as restaurants such as Starbucks and McDonald’s to send a message to the Trump administration. They have also targeted Coca-Cola, whose diet drink is the favourite of President Donald Trump.
The impact as a result of Trump’s 25% tariffs will not only hit Mexican products such as fruits, vegetables, meat, electronics and household appliances. Companies like Volkswagen and Stellantis have operations in Mexico which leaves them exposed. Several Japanese car manufacturers that rely on factories in Mexico to supply the U.S. and other markets will be affected too.
Unlike his first trade war crusade in 2016, where he bragged that tariff was beautiful and easy to win, this round, Trump acknowledged the potential impact of his tariffs – “Will there be some pain? Yes, maybe (and maybe not!). But we will Make America Great Again, and it will all be worth the price that must be paid.” However, the U.S. president has to make sure inflation does not spike.
U.S. inflation, at 2.9% in December 2024, is still higher than the Federal Reserve’s 2% target. The Peterson Institute estimated that U.S. inflation would be 0.54 percentage points higher this year, thanks to Trump’s tariffs. It didn’t help that the U.S. depends on Canada for most of its imported oil, which is refined into gasoline in the Midwest, not to mention avocados, tomatoes and cucumbers imported from Mexico.
Like it or not, inflationary pressures across the board is inevitable, ranging from immediate price increases such as groceries to pricier products over a longer period like cars. In 2018, Trump backed down after Mexico retaliated to U.S. tariffs on steel with tariffs of its own that included steel, pork, cheese, apples and bourbon. So, what’s the point of tariffs this time?
The 47th U.S. president has blamed Mexico, Canada and China as the root problem in fentanyl smuggling and illegal migration. But Trudeau argued that smuggling from Canada contributes less than 1% of the fentanyl street supply in the U.S., while Sheinbaum said it was “the White House’s slander” to accuse Mexico of causing the U.S.’s fentanyl problem.
China’s decision to complain to the WTO about the new tariffs was to show that not only the Chinese Communist Party plays by global rules, but also to send a message that it prefers a negotiation than an immediate retaliation. The U.S. imported US$401 billion worth of goods from China, with a trade deficit of over US$270 billion in the first 11 months of last year (2024).
Crucially, the Chinese’s exports to the U.S. account for only 3% of their GDP and less than 15% of China’s total exports. Unlike Canada and Mexico, Beijing has long been preparing itself to be less exposed and less depended on the U.S. through diversification, not just in terms of trading partners, investment, but also currencies and payment system. More importantly, China has more powerful bargaining chips.
The unexpected announcement by Beijing that China will restrict exports of rare minerals widely used in semiconductors, military weapons and electric vehicles – Gallium, Germanium, Antimony and superhard materials – under the pretext of”safeguarding national security and interests”, which obviouslywastaken from a page of the U.S. playbook, has caught the U.S. with its pants down.
Strategically, the world’s second biggest economy saw an opportunity to offer itself as a calm, stable and dependable alternative trading partner – unlike the unpredictable U.S. – to every nation, including Canada, Mexico and EU who are being targeted by Donald Trump. China also has a lot of leverage as the world’s biggest importer of fuel, soybean, meat, and semiconductors.
The Chinese have another lethal weapon – currency devaluation. Last month, the Renminbi or Yuan hit the key milestone of 7.3 to the US dollar, potentially signaling that Beijing is willing to let the currency devalue to boost exports. So, Trump’s 10% tariffs can be offset with Chinese Yuan’s artificial depreciation, which could wreck havoc to the U.S. and global economy by flooding cheap Chinese goods.
After four years of trade war with China during his first term, Donald Trump knew it is not easy to win the trade war after all, let alone to bring the world’s second biggest economy to its knees. The U.S. president also has great respect for strong leader like President Xi Jinping and Russian President Vladimir Putin, unlike Trudeau, whom was humiliated as “Governor Justin Trudeau of Canada”.
On the contrary, Trump can afford to bully, even troll and threaten, both Canada and Mexico as the smaller economies are likely to suffer more as a result of previous U.S.-China “Trade War 1.0”, which saw Mexico becoming the U.S.’s largest trade partner in 2023 and Canada was the second largest. The U.S. ran trade deficits with both countries – US$152 billion with Mexico and US$64 billion with Canada.
Now, with Trump’s 25% tariffs, Canada’s GDP could fall as much as 3%, while Mexico’s could suffer a 2% drop. This is why both key partners of Washington are upset and terrified of the trade war. Clearly, they need the U.S. more than the U.S. needs them, which the U.S. president can weaponise to make them to kowtow to his demands. - https://www.financetwitter.com/
Written by Aljazeera, Finance Twitter
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