President Trump announced on Monday that starting Tuesday, there would be a 25% tariff on imports from Mexico and Canada. This move raised concerns about a potential trade war in North America, which could lead to higher inflation and slow down economic growth.
During a press briefing, Trump stated, “They’re going to have to have a tariff.” He claims the tariffs are aimed at getting Mexico and Canada to tackle fentanyl trafficking and illegal immigration. Trump also wants to address trade imbalances and encourage factories to return to the U.S.
His comments caused the U.S. stock market to drop, with the S&P 500 index falling by 2%. This reflects the risks associated with these tariffs, which could threaten long-standing trade partnerships.
Despite the risks, the administration believes tariffs can invigorate U.S. manufacturing and attract foreign investment. Commerce Secretary Howard Lutnick mentioned that companies like TSMC, a chipmaker, have increased their investment in the U.S. due to the prospect of tariffs.
In February, Trump had already imposed a 10% tariff on imports from China, which is set to double to 20% starting Tuesday.
Initially, Trump had delayed implementing the tariffs after both Mexico and Canada promised to make concessions. However, he stated there is now “no room left” for avoiding the new tariffs. Canadian energy products will be taxed at a lower rate of 10%.
Canadian Foreign Minister Mélanie Joly responded to Trump’s announcement, confirming Canada is prepared to retaliate with $155 billion in tariffs. She emphasized that Canada has a strong plan in place and is continuing diplomatic discussions to address these issues.
In Mexico, President Claudia Sheinbaum was awaiting Trump’s decision. She indicated that Mexico would respond based on the U.S. government’s actions, emphasizing unity in Mexico regardless of tariffs.
Both countries have taken measures to address U.S. concerns. Mexico deployed troops to its border to combat drug trafficking, while Canada appointed a fentanyl czar to manage the crisis, despite the relatively small scale of fentanyl smuggling into the U.S.
As of Sunday, the details of Trump’s tariff decisions were still uncertain. Lutnick commented on the “fluid” situation, suggesting negotiations were ongoing. Treasury Secretary Scott Bessent mentioned that Mexico has proposed a 20% tax on all imports from China as part of discussions with the U.S.
However, many companies, including Ford and Walmart, have expressed worry about how tariffs could negatively impact their operations. Studies from the Peterson Institute for International Economics and Yale University suggest that tariffs could raise costs by over $1,000 for the average family.
Looking ahead, Trump intends to introduce “reciprocal” tariffs in April, matching those charged by other countries. He has also announced the removal of exemptions from earlier tariffs imposed on steel, aluminum, and various consumer products.
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