Trumps long threatened tariffs against Canada and Mexico come into effect

President Donald Trump’s long-threatened tariffs against Canada and Mexico finally went into effect on Tuesday, putting global markets on edge and setting up costly retaliations by the United States’ allies.

Starting just past midnight local time, imports from Canada and Mexico are now to be taxed at 25%, with Canadian energy products getting tariffed at 10%. In addition, the 10% tariff that Mr Trump placed on Chinese imports in February is doubling to 20%.

In response, Canadian Prime Minister Justin Trudeau said his country would slap tariffs on more than 100 billion dollars (£78.7 billion) of American goods over the course of 21 days.

China announced it will impose additional tariffs of up to 15% on imports of key US farm products, including chicken, pork, soy and beef.

The tariffs announced by the Commerce Ministry are due to take effect from March 10, although goods already in transit will be exempt until April 12.

And later on Tuesday Mexico’s President Claudia Sheinbaum said Mexico will respond to 25% tariffs imposed by the United States with its own retaliatory tariffs on US goods.

Ms Sheinbaum said she will announce the products Mexico will target on Sunday in a public event in Mexico City’s central plaza, perhaps indicating Mexico still hopes to de-escalate the trade war set off by Mr Trump.

“There is no motive or reason, nor justification that supports this decision that will affect our people and our nations,” she said.

The US president’s moves raised fears of higher inflation and the prospect of a devastating trade war even as he promised the American public that taxes on imports are the easiest path to national prosperity.

He has shown a willingness to buck the warnings of mainstream economists and put his own public approval on the line, believing that tariffs can fix what ails the country.

“It’s a very powerful weapon that politicians haven’t used because they were either dishonest, stupid or paid off in some other form,” Mr Trump said on Monday at the White House.

“And now we’re using them.”

US markets dropped sharply on Monday after Mr Trump said there was “no room left” for negotiations that could lower the tariffs. Shares in Europe and Asia were mostly lower on Tuesday after they took effect.

The Canada and Mexico tariffs were originally supposed to begin in February, but Mr Trump agreed to a 30-day suspension to negotiate further with the two largest US trading partners.

The stated reason for the tariffs is to address drug trafficking and illegal immigration, and both countries say they have made progress on those issues. But Mr Trump has also said the tariffs will only come down if the US trade imbalance closes, a process unlikely to be settled on a political timeline.

There is the possibility of the tariffs being short-lived if the US economy suffers, just as there is the possibility of more tariffs to come on the European Union, India, computer chips, autos and pharmaceutical drugs, as Mr Trump has promised.

Mr Trump has injected disorienting volatility into the world economy, leaving it off balance as people wonder what he will do next.

“It’s chaotic, especially compared to the way we saw tariffs rolled out in the first (Trump) administration,” said Michael House, co-chair of the international trade practice at the Perkins Coie law firm.

“It’s unpredictable. We don’t know, in fact, what the president will do.”

Democratic lawmakers were quick to criticise the tariffs, but even some Republican senators raised alarms.

Senator Susan Collins said she was “very concerned” about the tariffs going into effect because of her state’s proximity to Canada.

“Maine and Canada’s economy are integrated,” Ms Collins said, explaining that much of the state’s lobsters and blueberries are processed in Canada and then sent back to the US.

The world economy is now caught in the fog of what appears to be a trade war.

Even after Mr Trump announced on Monday that the tariffs were going forward, Canadian officials were still in touch with their US counterparts.

“The dialogue will continue, but we are ready to respond,” Canadian defence minister Bill Blair said in Ottawa as he went into a special Cabinet meeting on US-Canada relations.

“There are still discussions taking place.”

Shortly after Mr Blair spoke, Mr Trudeau said Canada would put 25% tariffs against 155 billion Canadian dollars (£84 billion) of American goods, starting with tariffs on 30 billion Canadian dollars (£16 billion) worth of goods immediately and on the remaining amount on American products in three weeks.

“Our tariffs will remain in place until the US trade action is withdrawn, and should US tariffs not cease, we are in active and ongoing discussions with provinces and territories to pursue several non-tariff measures,” Mr Trudeau said.

Damon Pike, technical practice leader for customs and trade services at the tax and consulting firm BDO, suggested the responses of other countries could escalate trade tensions and possibly increase the economic pressure points.

“Canada has their list ready,” Mr Pike said. “The EU has their list ready. It’s going to be tit for tat.”

Tim Houston, the leader of Canada’s Atlantic coast province of Nova Scotia, said he would direct the Nova Scotia Liquor Corporation to remove all US alcohol from store shelves.

Mr Houston also said his government will limit access to provincial procurement for American businesses and double the cost for commercial vehicles from the United States on a tolled highway.

To resolve the tariffs being imposed on Tuesday, the White House would like to see a drop in the seizures of fentanyl inside the United States, not just on the northern and southern borders.

Administration officials say that seizures of fentanyl last month in everywhere from Louisiana to New Jersey had ties to foreign cartels.

The Trump administration has suggested that inflation will not be as bad as economists claim, saying that tariffs give a reason for foreign companies to open factories in the United States.

Published: 04/03/2025 by Radio NewsHub