Trump unleashes sweeping tariffs, Canada retaliates while China and Mexico vow countermeasures

Mexico’s President Claudia Sheinbaum on Saturday said she had ordered retaliatory measures as part of a “Plan B”, but did not say what those measures will be.

China’s Commerce Ministry issued a media release vowing corresponding countermeasures and to file a WTO complaint, saying the move “seriously violates” international trade rules.

The numbers: China, Mexico and Canada accounted for more than 40% of imports into the US last year. Bloomberg economists estimate the measures will raise the average US tariff rate to 10.7%, from near 3%, dealing a “significant supply shock” to the domestic economy. That would trigger a potential 1.2% hit to US GDP and an 0.7% increase to core inflation.

Canada is by far the biggest foreign oil supplier to the US, accounting for about 60% of its crude imports. Canadian oil and energy products have been carved out of the 25% tariff bracket and will face a 10% levy. Canadian exports to the US account for roughly 17.8% of Canadian GDP and support over 2.4 million jobs, Reuters noted.

Meanwhile, Census Bureau data showed the US imported more than USD475 billion worth of Mexican products in 2023, while US exports to Mexico accounted for more than USD322 billion. Close to a third of Mexico's gross domestic product depends directly on exports to the United States, economic analyst Gabriela Siller said on X.

The context: Trump said his tariffs were due to “the major threat of illegal aliens and deadly drugs killing our Citizens, including fentanyl”.

They come after Trump campaigned on a platform of extensive tariffs aimed at holding trading partners accountable for trade deficits and forcing companies to manufacture in the United States.

The unilateral imposition of tariffs has left markets bracing for further volatility and a potential reassessment of the established order in North American trade.

What they said: “Today, I have implemented a 25% Tariff on Imports from Mexico and Canada (10% on Canadian Energy), and a 10% additional Tariff on China. This was done through the International Emergency Economic Powers Act (IEEPA) because of the major threat of illegal aliens and deadly drugs killing our Citizens, including fentanyl,” Trump said in a post on Saturday (Sunday AEDT).

“We need to protect Americans, and it is my duty as President to ensure the safety of all. I made a promise on my Campaign to stop the flood of illegal aliens and drugs from pouring across our Borders, and Americans overwhelmingly voted in favor of it.”

Canadian Prime Minister Justin Trudeau said: “Tonight, first I want to speak directly to Americans, our closest friends and neighbours. This is a choice that yes, will harm Canadians. But beyond that, it will have real consequences for you, the American people. Tariffs against Canada will put your jobs at risk, potentially shutting down American auto assembly plants and other manufacturing facilities. It will raise costs for you, including food at the grocery store and gas at pump,” he said.

“It will impede your access to an affordable supply of vital goods crucial for US security, such as nickel, potash, uranium, steel and aluminium. It will violate the free trade agreement that the president and I along with our Mexican partner, negotiated and signed a few years ago. It doesn’t have to be this way. “

“As neighbours we must work collaboratively to fix this (illegal fentanyl trade). Unfortunately, the actions taken today by The White House split us apart instead of bringing us together.”

Mexican President Claudia Sheinbaum said in a social media post: “We categorically reject the slander that the White House is making against the Mexican government of having alliances with criminal organizations, as well as any intention of intervention in our territory. If such an alliance exists anywhere, it is in the armouries of the United States that sell high-powered weapons to these criminal groups, as was demonstrated by the United States Department of Justice itself in January of this year," she said.

"Problems are not resolved by imposing tariffs, but by talking and dialoguing as we did in recent weeks with your State Department to address the phenomenon of migration; in our case, with respect for human rights. The graph that President Trump has been uploading to his social networks about the decrease in migration was prepared by my team, which has been in constant communication with his. I instruct the Secretary of Economy to implement Plan B that we have been working on, which includes tariff and non-tariff measures in defence of Mexico's interests. Nothing by force; everything by reason and right.”