Trump’s Trade War: Pledges 25% Tariffs On Canada, Mexico; More On China Too

Trump’s Trade War: US President-elect Donald Trump on Monday pledged a 25 per cent tariff on all products from Mexico and Canada from his first day in office, and an additional 10 per cent tariff on goods from China, citing illegal immigration and the trade of illicit drugs.

"On January 20th, as one of my many first Executive Orders, I will sign all necessary documents to charge Mexico and Canada a 25 per cent Tariff on ALL products coming into the United States and its ridiculous Open Borders," Trump said in a post on Truth Social.

Trump said the tariffs would remain in place until the two countries clamp down on drugs, particularly fentanyl, and migrants crossing the border illegally.

New Tariff On Terms Violation

Trump's threatened new tariff would appear to violate the terms of the US-Mexico-Canada Agreement on trade, which Trump signed into law and took effect in 2020, and continued the largely duty-free trade between the three countries.

Mexico and Canada are the United States' largest trading partners. More than 83 per cent of exports from Mexico went to the US in 2023 and 75 per cent of Canadian exports go to the country.

Canada and the United States at one point imposed sanctions on each others' products during the rancorous talks that eventually led to USMCA.

On China, the president-elect accused Beijing of not taking strong enough action to stop the flow of illicit drugs crossing the border into the US from Mexico.

"Until such time as they stop, we will be charging China an additional 10 per cent Tariff, above any additional Tariffs, on all of their many products coming into the United States of America," Trump said.

The Chinese embassy in Washington, the office of Canadian Prime Minister Justin Trudeau and the Canadian foreign ministry did not immediately respond to separate requests for comment.

Mexico's foreign ministry and its economy ministry did not have an immediate comment when contacted by Reuters.

Chinese Economy In More Vulnerable Position

Trump has previously pledged to end China's most-favored-nation trading status and slap tariffs on Chinese imports in excess of 60 per cent - much higher than those imposed during his first term.

The Chinese economy is now in a much more vulnerable position given the country's prolonged property downturn, debt risks and weak domestic demand.

The dollar rose more than 2 per cent against the Mexican peso MXN= and jumped 1 per cent on the Canadian dollar CAD=D3 after Trump posted on his social media platform. Japan's Nikkei .N225 fell 1 per cent and US stock futures ESc1 dropped 0.3 per cent.

In the run-up to the Nov. 5 election, Trump floated plans for blanket tariffs of 10 per cent to 20 per cent on virtually all imports. He also said he would put tariffs as high as 200 per cent on every car coming across the US-Mexico border.

He also voiced his intent to formally invoke the USMCA's six-year review provision upon taking office. Currently, it is expected in July 2026.

Economists say that Trump's overall tariff plans, likely his most consequential economic policy, would push US import duty rates back up to 1930s-era levels, stoke inflation, collapse US-China trade, draw retaliation and drastically reorder supply chains.

They say tariffs are paid by the companies that import the products subject to the duties, and they either pass on the costs to consumers or accept lower profits.

Trump frequently refers to countries paying as a consequence of his tariff plan, saying on Monday that Mexico and Canada will "pay a very big price."