Trump trade tiff widens as Mexico, Canada, China impose tariffs

A 25% tariff imposed by President Donald Trump on Canadian and Mexican goods shipped to the U.S. went into effect on Tuesday.

The two U.S. trading partners in turn retaliated or promised to retaliate with tariffs on U.S. goods.

President Trump is hoping to use tariffs to improve national security and economic strength.

Canadian Prime Minister Justin Trudeau imposed 25% tariffs on about $21 billion of U.S. exports on Tuesday, reported Reuters. Included on the tariff list: orange juice, peanut butter, wine, spirits, beer, coffee, appliances, apparel, footwear, motorcycles, cosmetics, and pulp and paper.

In Mexico, President Claudia Sheinbaum said she will impose new tariffs on U.S. goods, but won’t announce which goods will be hit until Sunday, according to the Associated Press.

The U.S. auto industry may be hardest hit by the tariffs in Canada and Mexico.

AP estimates that combined, car and truck sales from the two countries account for over $130 billion in U.S. sales.

The second-largest industry expected to be affected, oil and gas may fare better since Trump has imposed a lighter, 10% tariff on Canadian oil and gas imports, which account for nearly $110 billion in trade, according to census data supplied by the AP. 

Trump believes that free trade with Canada and Mexico has unfairly punished U.S. workers and penalizes the U.S. economy by shipping jobs overseas. 

“The U.S. has one of the most open economies in the world, yet our trading partners keep their markets closed to U.S. exports – and reciprocal trade will finally correct that imbalance,” the White House said about tariffs on Canada, Mexico and other allies.  

Trump has noted previously that the U.S. suffers from a $1 trillion trade deficit, with foreign trade accounting for 67% of Canada’s GDP, 73% of Mexico’s GDP and just 24% of U.S. GDP.  

The trade situation between the U.S. and China remains more complex, because in addition to charges that China engages in unfair trade practices with the U.S., it’s generally acknowledged that China is the “primary” exporter of the precursor chemicals used to make fentanyl. 

Trump has demanded that China take active steps to stop the trade of those chemicals to the U.S.  

“These drugs kill tens of thousands of Americans each year, including 75,000 deaths per year attributed to fentanyl alone,” more than the entirety of U.S. troops killed in the Vietnam War, according to a statement by the White House. 

China subsequently announced that it would impose a 15% tariff on some U.S. agricultural products exported to the 1.3 billion-person country, including chicken, wheat, corn and cotton, with 10% tariffs on a variety of other U.S. foods for export, said the New York Times.  

The developments come after Trump hit China with 10% tariffs on all goods imported from the communist country. 

“I must reiterate that Chinese people cannot be swayed by fallacies, deterred by intimidation, and bullying tactics are not the right way to deal with China,” Chinese Foreign Ministry spokesperson Lin Jian said during a regular press briefing in Beijing on Tuesday. “Attempting to exert maximum pressure on China is targeting the wrong opponent and is a misreading of the situation.” 

The broad market S&P 500 lost about 2% of its value on the opening of the index on the tariff tiff but has rallied to trim the losses to less than 1%. The S&P 500 is still up around 5% in the last 6 months. 

But Trump is betting that U.S. trade partners – not including China – will figure out they have more to lose in a trade war than they do in negotiating a reciprocal trade agreement with the U.S., even if it might hurt the U.S. consumer in the short run. 

“Though previous Administrations have failed to leverage America’s combination of exceptional strength and its unique role in world trade to advance the security interests of the American people, President Trump has not,” said the White House.