After a false start with Colombia last weekend, the Trump Tariff War of 2025 has officially begun, with new levies on imports from the top US trading partners, accounting for 40% of the goods imported into the US last year,
Friday, White House spokesperson Karoline Leavitt told reporters duties of 25% on Canadian and Mexican goods and 10% on Chinese roods would be published on Saturday and would take effect immediately.
Reuters quoted sources familiar with the tariff deliberations as saying that Trump would announce tariffs on Canadian and Mexican imports on Saturday but delay collection of the duties until March 1 and offer a limited process for certain imports to be exempted.
Mr. Trump told reporters Friday that Canadian oil would be hit with lower tariffs of 10%, which could take effect later, on 18 February.
The president also said he planned "absolutely" to impose tariffs on the European Union in the future, saying the bloc had not treated the US well. "We're going to be putting tariffs on steel and aluminum, and ultimately copper. Copper will take a little longer," he said.
Earlier in the week as Congressional Republicans gathered at his Doral Hotel in Miami, Mr Trump told them he will be imposing sweeping tariffs soon on computer chips, semiconductors and pharmaceuticals in order to bring production back to the United States.
Producers will flock to the United States in order to avoid tariffs that could be anywhere from 25 percent, 50 percent or 100 percent, he told the lawmakers Tariffs also will be impose on steel, aluminum, copper and other materials needed for defense production, he continued.
Mr. Trump did not offer a timeline for any of these tariffs. He criticized Canada, Mexico and China. in his remarks, saying that they have decimated US industries like autos.
As tariffs go up, taxes will come down and production will return to the United States, he said. “If you want to share our market, you must pay for the privilege.”
In the first 11 months of 2024, the combined value of total US trade with Canada ($699 billion), China ($532 billion) and Mexico ($776 billion) was worth almost $2 trillion.
Canadian politicians are reaching the end of their tolerance for their hamfisted treatment at the hands of the new US president. Friday Primer Minister Justin Trudeau said Ottawa has prepared to slug it out: “We’re ready with a response — a purposeful, forceful but reasonable, immediate response,”
Former finance minister and potential candidate for prime minister Chrystia Freeland put a finer point on it, calling for retaliatory tariffs " targeting products from Republican states that voted for Trump and products made by his billionaire buddies." In an interview with The Canadian Press, Freeland said there should be a 100 per cent tariff on all U.S. wine, beer and spirits, and on all Teslas automobiles.
“We need to be very targeted, very surgical, very precise,” Freeland said. “We need to look through and say who is supporting Trump and how can we make them pay a price for a tariff attack on Canada.”
“One of the characteristics of the Trump administration is they like to traffic in uncertainty,” she said. “There are lots of reports about there being internal debates in the U.S. (administration), so let’s use that to our advantage. And let’s put some cards on the table and be very clear that if they hit us, we will hit them back.”
Mark Carney, the former head of Canada's and England's central banks, told BBC Newsnight on Friday that the tariffs will hit economic growth and drive up inflation.
"They're going to damage the US's reputation around the world," said Carney, who is also in the running to replace Mr. Trudeau as leader of Canada's Liberal Party.
Earlier last week in an interview with The Financial Times, Canada’s foreign minister Melanie Joly warned the tariffs would force the US to buy more oil from Venezuela. Canada provides over half of US Oil imports, and given the properties of Canadian Oil and the US refinery base, a substantial fraction - likely 40% or more - of US gasoline supply derives from Canadian crude.
Canadian and Venezuelan oil are predominantly heavy and sour crude, meaning they have a high viscosity and elevated sulfur content. This contrasts with most U.S. crude production, which is largely lighter and sweeter (i.e., lower viscosity and lower sulfur content). A refinery which lost its Canadian supply would not be able to substitute US sweet and light feedstock and would be compeeled to import Venezuelan crude.
“We will always maintain a dialogue with the United States. We have a plan A, a plan B, a plan C, for whatever the United States government decides. We will wait with a cool head, making decisions; we are prepared and we will maintain this dialogue,” Mexican President Claudia Sheinbaum declared Friday.
Mexico is the largest supplier of goods to the US, accounting for more than 15$ of US imports, more than Canada or China. In addition to the ubiquitous fresh produce, Economy Minister Marcelo Ebrard contends US consumers will pay an additional $7 billion and $3 billion for home appliances.
Mexico is the largest export market for U.S. automotive parts and the fourth-largest producer of automotive parts worldwide, generating USD 107 billion in annual revenues. While Thailand may be the biggest exporter of passenger, light truck and medium truck tires, to the US. Mexican production iis a close second,
Unlike Ottawa and Mexico City, which had been allies with established trade agreements, Beijing has been grappling already, so their reactions to the measures will likely be less shocking.
In addition to retaliatory tariffs and further export restrictions, China can be epected to redouble efforts to reduce economic dependence on the United States by strengthening trade relationships with developing countries and advancing domestic technological capabilities, particularly in the semiconductor industry. The reaction of the last bout of tariffs, permitting a depreciation of the yuan, remains a lever, though fraught with consequence.
Ultimately, other trading partners may find the Chinese experience most illuminating. As Goldman Sachs economists reminded us in a note, tariffs can be avoided in three ways:
The economists analyzed granular product-level data and found tariff evasion can explain as much as $90 billion of the estimated $240 billion pullback in US imports from China compared with pre-trade war levels.
The White House has repeatedly struck back at the orthodox critique of tariffs as regressive, inflationary and damaging to the economy, leaving skeptics cowed and the public befuddled.
Many observers are resigned to wait and see what emerges from the fog of politics, while some fortunates find solace that an eight-figure check to the President or a family member may eliminate roadblocks..
Several GOP senators told Semafor that they’ve warned the president or his team about potential for “damning consequences to some sectors of the economy, particularly agriculture,” accurding to Sen. Jerry Moran, (R-Kan). The injury to farmers from the 2018 Trump tariffs was mitigated by a $16 billlion aid package, the likes of which may prove harder to sell on the hill this time.
Nicole Bivens Collinson with Sandler, Travis and Rosenberg notes that no statutory exclusions process has been defined, so companies may not be able to rely on influence in the new administration to get relief.
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