Mexico, Canada and China react to Trump's trade war with more tariffs

WashingtonDonald Trump's trade war against the world is already underway. Canada and Mexico have already announced that they will apply new tariffs against American imports after the 25% US tariffs for both countries came into effect early Tuesday morning. China, which has seen the United States increase the pressure with an increase of up to 20% in its exports, did not wait and minutes after the new rate was applied, responded with tariffs of up to 15% on American imports.

With taxes on his neighbors, and main trading partners, Trump has dynamited decades of free trade with Canada and Mexico that began in 1994 with NAFTA and that the Republican himself updated in 2020 with the signing of T-MEC. More than 80% of Mexico's annual exports go to the US and the same goes for 76% of Canada's. The president's efforts to use tariffs as a diplomatic weapon to solve other, unrelated problems – the entry of fentanyl and immigration – predict painful consequences for the American consumer. Many citizens voted for Trump last November believing in the promise that he would lower the price of the shopping basket. The measures predict just the opposite.

Much of the fresh produce sold in American supermarkets, such as avocados, strawberries or tomatoes, comes from Mexico. By 2023, almost three-quarters of American agricultural imports from Mexico were vegetables, fruits, beverages and distilled spirits, according to the US Department of Agriculture. Fresh produce – fruits and vegetables – given their quick expiration and the impossibility of storing them for long, will be the first to reflect the consequences of the trade war. The price of tequila and beer is also expected to rise. Mexican brands such as Modelo are quite common on supermarket shelves, as well as in restaurants and bars.

On the other hand, the United States imports a wide range of products from Canada, including meat, grain and maple syrup, a popular sweetener among Americans. Canada accounts for about 70% of the world's maple syrup production and by 2023 more than 60% of its exports went to the US, according to Canadian government data.

The Dow Jones stock index already plummeted more than 700 points yesterday afternoon when the US president said there was no room for a last-minute deal to stop the tariffs from coming into force. On Tuesday, US stock markets opened in the red, with the S&P 500 down 1.16% and the Nasdaq down 0.60%.

Trump's tariffs will most likely hurt the Canadian economy, as a large part of its exports go to the United States. "He wants to collapse Canada's economy to facilitate annexation," Canadian Prime Minister Justin Trudeau said at a press conference on Tuesday. Since coming to power, Trump has insisted that he wants to make Canada the 51st state.

Trudeau has strongly condemned the measure and has promised a strong response. "It is time to fight back strongly and show that a fight with Canada will have no winners," he said. The Canadian president will meet this afternoon with other Canadian officials to discuss a response, including the imposition of tariffs and the possible cancellation of contracts with American companies. These taxes are expected to affect some 100 billion dollars in American imports.

Quebec has recalled how they have done everything promised last month to reinforce their border with the US. In February Trudeau achieved a thirty-day truce on tariffs with a battery of concessions to improve border security.

Sheinbaum will call Trump

Mexican President Claudia Sheinbaum said at her daily press conference on Tuesday that she would "probably speak with Trump on Thursday" and has already announced that she will announce details of Mexico's tariff response on Sunday. "There is no reason or justification to support this decision that will affect our people and our nation. Nobody wins," Sheinbaum condemned.

Sheinbaum regretted that Washington had made a "unilateral" decision, despite the results that her government put on the table to avoid a trade war. "Strong actions were taken against organized crime and fentanyl trafficking, as well as bilateral security and trade meetings, which led to substantive cooperation agreements between the two countries," she defended. Like Canada, Mexico obtained a thirty-day extension in February in exchange for reinforcing the border.

More trade tension with China

The feeling of siege against China is only growing. On the one hand, Beijing is watching as Trump tries to get closer to what has been his great ally until now, the Russian Vladimir Putin, in order to isolate him further. And on the other, it sees how the trade war is only growing. The document published by the White House on Monday night, in which it announced the increase from 10% to 20%, links the increase in commercial pressure on China with its "failure" to stop the arrival of fentanyl in the United States. When the 10% tariffs were initially applied last February, Trump assured that within "24 hours" there would be a call with his Chinese counterpart, Xi Jinping. Nothing else has been heard about this call.

China, in fact, has warned on Tuesday that it "will not bow to pressure" and, as announced last month, has confirmed tariffs of up to 15% on imports of the main American agricultural products. The Ministry of Finance has detailed that the 15 percent tariffs will be applied to chicken, wheat or cotton, among others, while it will also impose 10 percent on soybeans, pork and beef, fish and seafood, fruits and vegetables and dairy products. The new measures will come into effect next Monday, March 10. "China does not tolerate hegemony or bullying. If the US insists on maximum pressure tactics against China, it has chosen the wrong opponent," said Chinese Foreign Ministry spokesman Lin Jian.

Chinese and Hong Kong stocks fell on Tuesday as new US tariffs came into effect. China's benchmark CSI300 index fell 0.3% at the close of morning trading.

The other casualty: the auto market

Taxes on Mexican imports will also have an impact on the US auto industry. Many American car companies manufacture their cars in Mexico or other countries to reduce costs. In fact, the manufacturing of American cars in Mexican territory is possible thanks to a trade agreement negotiated by Trump during his previous presidency.

"All auto manufacturers are expected to be affected by these tariffs in Canada and Mexico. Most anticipate that the price of some vehicle models will increase by up to 25% and that the negative impact on the price and the availability of the vehicles will be greatly reduced. immediately," said John Bozzella, who encapsulates the Alliance for Innovation in Automotive.

The entry into force of the new tariffs marks the first stage of a trade conflict that is expected to escalate further with the reciprocal tariffs that the US president wants to apply in the rest of the world, with the European Union as the main target. The US president, who has also attacked VAT, said he would impose general tariffs of 25% on EU products.

Despite negative forecasts, the Trump administration continues to sell tariffs as a winning policy. During Monday's press conference, Commerce Secretary Howard Lutnick defined the investment in the US by the Taiwanese chip company TSMC as a triumph of protectionist measures. Lutnick has assured that the Taiwanese company will create the facility in Arizona to manufacture chips because "they want to avoid tariffs", referring to reciprocal taxes.

Confusion and chaos

Confusion and chaos have been brewing over tariffs in Mexico and Canada for days. Last week Trump raised false hopes when he mixed up tariffs against his neighbors with those of the EU and said they would take effect on April 2. This made it seem like the new government was giving its main trading partners an extra month of grace. After the Mexican peso and the Canadian dollar rose against the dollar, a member of the White House had to come out to clarify that the tariffs would take effect on March 4 and that only after that would it be evaluated whether they would be stopped again or changes made. The next day Trump corrected himself by telling Truth Social that, in addition to applying the 25% tariffs as of March 4, he would also apply an additional 10% for China.

The confusion, however, did not stop there. On Sunday night, Lutnick acknowledged on Fox that border crossings had fallen (one of the demands tied to the tariffs) and that Mexico and Canada were also considering imposing tariffs on China, as the US is asking. For all this, Lutnick assured that the tariffs could be less than 25% and it seemed that the door was also open to another truce.

From the beginning, Trump has linked the application of tariffs in Mexico and Canada with the reinforcement of the border to avoid the entry of migrants and fentanyl. The president is using trade tariffs to try to solve other problems that are in no way related.

Last February, Mexican President Claudia Sheinbaum managed to appease Trump with the promise of sending more troops to the border. Canadian President Justin Trudeau managed to please the tycoon by promising to appoint a "fentanyl czar" and signing a new intelligence directive on organized crime and fentanyl, for which he would allocate $200 million.