Trump plans tariffs on Mexico, Canada and China that could cripple trade

President-elect Donald Trump said Monday that he would impose tariffs on all products coming into the United States from Canada, Mexico and China on his first day in office, a move that would scramble global supply chains and impose heavy costs on companies that rely on doing business with some of the world’s largest economies.

In a post on Truth Social, Trump mentioned a caravan of migrants making its way to the United States from Mexico, and said he would use an executive order to levy a 25% tariff on goods from Canada and Mexico until drugs and migrants stopped coming over the border.

“This Tariff will remain in effect until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop this Invasion of our Country!” the president-elect wrote.

“Both Mexico and Canada have the absolute right and power to easily solve this long simmering problem,” he added. “We hereby demand that they use this power, and until such time that they do, it is time for them to pay a very big price!”

In a separate post, Trump also threatened an additional 10% tariff on all products from China, saying that the country was shipping illegal drugs to the United States.

“Representatives of China told me that they would institute their maximum penalty, that of death, for any drug dealers caught doing this but, unfortunately, they never followed through,” he said.

Taken together, the tariff threats were a dramatic ultimatum against the three largest trading partners of the United States, and a move that threatens to sow chaos in America’s diplomatic and economic relationships even before Trump sets foot in the White House.

News of the tariffs immediately set off alarms in the three nations, with the currencies of Canada and Mexico sliding against the dollar and a spokesperson for the Chinese Embassy in Washington warning that “no one will win a trade war.”

The tariffs would also have serious implications for American industries, including auto manufacturers, farmers and food packagers, which busily ship parts, materials and finished goods across U.S. borders. Mexico, China and Canada together account for more than a third of the goods and services both imported and exported by the United States, supporting tens of millions of American jobs.

The three countries together purchased more than $1 trillion of U.S. exports and provided nearly $1.5 trillion of goods and services to the United States in 2023.

The costs could be particularly high for the industries that depend on the tightly integrated North American market, which has been knit together by a free trade agreement for over three decades. Adding 25% to the price of imported products could make many too costly, potentially crippling trade around the continent. It could also invite retaliation from other governments, which could put their own levies on American exports.

That, in turn, could cause spiking prices and shortages for consumers in the United States and elsewhere, in addition to bankruptcies and job losses. Trump has insisted that foreign companies pay the tariffs, but they are actually paid by the company that imports the products, and in many cases passed on to American consumers.

Imposing tariffs on Canada and Mexico would also violate the terms of the North American trade agreement that Trump signed in 2020, called the United States-Mexico-Canada Agreement. That could open the United States to legal challenges, and potentially threaten the pact itself and the terms of trade it sets for North America.

While Trump did not explicitly invite any negotiations from Canada, Mexico or China, he has a history of using tariffs as leverage in negotiations. That may raise questions about whether his Monday evening announcements were merely an opening offer in what could be an extended negotiation.

Still, if Trump follows through on his plans to impose tariffs on Day 1, that may leave little time for talks to delay or defuse the tariffs.

Canadian and Chinese officials defended their efforts to fight fentanyl Monday night, and emphasized the mutual benefits of trade with the United States.

The Canadian government, in a statement, sought to focus on the deep, inextricable ties between the two economies.

“Canada is essential to U.S. domestic energy supply, and last year 60% of U.S. crude oil imports originated in Canada,” said the statement, issued by Prime Minister Justin Trudeau; the finance minister, Chrystia Freeland; and the public safety minister, Dominic LeBlanc. It added: “We will of course continue to discuss these issues with the incoming administration.”

Liu Pengyu, a spokesperson for the Chinese Embassy in Washington, said that “the idea of China knowingly allowing fentanyl precursors to flow into the United States runs completely counter to facts and reality.”

“China believes that China-U.S. economic and trade cooperation is mutually beneficial,” he added.

Mexican officials did not immediately react, but the announcement most likely did not come as a surprise to them after repeated threats from Trump to impose such tariffs. In the closing days of his campaign, Trump threatened to place tariffs as high as 100% on all goods from Mexico.

Mexican officials had already signaled that they were prepared to respond with retaliatory tariffs of their own.

“If you put 25% tariffs on me, I have to react with tariffs,” Marcelo Ebrard, Mexico’s economy minister, told a radio interviewer this month. “Structurally, we have the conditions to play in Mexico’s favor,” he added.

This article originally appeared in The New York Times.

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