When President Trump reneged on his promise to immediately impose new tariffs on his first day in office, business leaders and others who support international trade breathed a sigh of relief.
That relief was short-lived. On Monday night, just hours after his inauguration speech, Mr. Trump said he planned to impose a 25 percent tariff on products from Canada and Mexico starting Feb. 1, claiming the countries were killing “mass numbers of people and fentanyl.” allowed. come to the United States.
On Tuesday evening, Mr. Trump said he would also impose an additional 10 percent tariff on Chinese products by the same date, accusing China of sending fentanyl to Mexico and Canada, which then entered the United States.
Mr. Trump's threats last just 10 days before significant tariffs could come into effect on the United States' three largest trading partners, a move that could throw U.S. diplomatic relations and global supply chains into disarray.
Mexico, China and Canada account for well over a third of the goods and services imported into or purchased from the United States, supporting tens of millions of American jobs. Together, the countries purchased more than $1 trillion in U.S. exports in 2023 and supplied nearly $1.5 trillion in goods and services to the United States, according to government data from the past year.
While tariffs have long been used by the United States as punishment for unfair trade practices, Trump's first use of them is aimed at a very different outcome: tightening America's borders against immigrants and illegal drugs.
These targets could mean that Trump's tariffs are less likely to go into effect, or more likely to be eliminated if they do go into effect. That contrasts with other tariffs his team is planning, which would aim to reshuffle global supply chains and boost government revenues.
It is also not clear which products the tariffs would apply to if they were imposed. One person familiar with the Trump administration's deliberations said they had been considering tariffs on all imports from those countries, as well as tariffs on specific goods such as cars, steel and aluminum. The Trump administration did not immediately respond to a request for comment.
Stock markets have largely shrugged off Trump's tariff declarations and closed at near record highs yesterday.
Officials in Canada, Mexico and China have been working to draw up lists of U.S. products on which they could impose their own tariffs in retaliation if Mr. Trump decides to move forward.
But they are also responding to Mr. Trump in ways that indicate his tariff threats are working. The Canadian and Mexican governments in particular have rushed to prevent tariffs, sending officials to reassure the Trump team that they are trying to address his concerns.
The Mexican government has expanded its migration deterrence efforts and increased seizures of illicit opioids. Canada has also committed new resources to patrol its border, including the deployment of two new Blackhawk helicopters and the purchase of 60 U.S.-made drones to patrol the border. Canada's immigration agency said the number of irregular migrants has fallen by 86 percent in the past two months, a byproduct of a tightening of visa rules. The number of illegal border crossings at the US-Mexico border is at a four-year low.
It is unclear whether the Chinese government has taken any new steps in response to Mr. Trump's recent tariff threats, but Mr. Trump said he discussed fentanyl and trade and other issues in a phone call with Chinese leader Xi last Friday. Jinping.
The Chinese government, during both the Trump and Biden administrations, had made commitments to the United States to prevent the export of fentanyl and precursors. During Trump's first term, China imposed a ban on fentanyl and began coordinating efforts with the United States to catch human traffickers. And in 2023, Mr. Xi and former President Joseph R. Biden Jr. agreed to a series of bilateral talks on narcotics after meeting in Woodside, California.
Asked whether the United States and China had discussed the prospect of 10 percent tariffs on Chinese products, Mao Ning, a spokeswoman for China's Foreign Ministry, said at a news briefing in Beijing on Wednesday that China was “willing” to communicate with the United States. States to expand cooperation and manage differences between the two countries.
“We always believe there is no winner in a tariff or trade war,” she added. “We will always firmly protect our national interests.”
During a Senate confirmation hearing last week, Treasury Secretary nominee Scott Bessent cited three main reasons why the Trump administration might implement tariffs. Some tariffs could be aimed at combating unfair trade practices, while others could generate revenue for the federal budget.
He added that Mr. Trump, as an experienced negotiator, had “added a third use of tariffs.” Tariffs could be used for negotiations, including with Mexico over the fentanyl crisis, he said.
Douglas A. Irwin, an economic historian at Dartmouth College, said there have been a few examples in history when U.S. leaders had tied trade actions to non-trade goals — such as President Nixon making Okinawa's return to Japan conditional on hiring of export restrictions. in textiles – but that Mr Trump “was very public and transactional in his approach.” “It's quite unique and unusual,” he says.
Business owners have expressed concern about the prospect of new tariffs. Economists estimate that a 25 percent tariff on goods from Canada and Mexico could shrink the size of the U.S. economy by hundreds of billions of dollars, and possibly also nullify the trade deal between the three countries, which requires members to abstain of such practices. moves.
The economies of Mexico and Canada in particular are closely integrated with the US economy. Supply chains for various goods weave back and forth across North American borders, traveling between fields, factories, and stores in each country as they are transformed from raw materials into finished products.
A single car and its parts can cross the US-Canada border multiple times during assembly. Jeans could be made from cotton, fabric and buttons from the United States, but sewn in a factory in Mexico. Farmers in the United States send corn and soybeans south of the border to be made into packaged food and animal feed; Mexican farms send U.S. supermarkets cheap avocados, mangoes and tomatoes, even in the dead of winter.
If a 25 percent tariff were added every time one of those products crossed the U.S. border, it could significantly increase the cost of the goods Americans buy and even force U.S. manufacturers to shut down operations.
“The supply chain challenges we have faced in recent years will seem mild compared to what lies ahead,” said Jonathan Colehower, managing director of Global Supply Chain Management at UST, a consulting firm.
The tariff threats are reminiscent of incidents during Trump's first term. In the spring of 2019, Mr. Trump pledged to close the U.S. border with Mexico and then threatened 5 percent tariffs on all Mexican products, rising to 25 percent unless the country stems the flow of migrants and asylum seekers. Mr. Trump ultimately decided not to follow through with these threats.
Matina Stevis-Gridneff And Siyi Zhao contributed to research and reporting.
