Mr Trump is declaring an economic emergency to put duties of 10% on all imports from China and 25% on imports from Mexico and Canada – America’s largest trading partners – except for a 10% rate on Canadian oil.
Mr Trump says the tariffs are to force the countries to do more to stop the flow of the drug fentanyl into the US, but also dovetail with his embrace of protectionist measures to boost domestic manufacturing and as a potential source of revenue for the federal government.
Trucks drive to cross to US at Otay Commercial port in Tijuana, Baja California state, Mexico on January 31, 2025. Mexico’s economy suffered its first contraction in three years in the fourth quarter of 2024, official figures showed on January 30, as the country braces for US President Donald Trump’s threatened tariffs. (Photo: Guillermo Arias / AFP)In Mr Trump’s view, the 25% tariffs against the two North American allies and a 10% tax on imports from Washington’s chief economic rival are a way for the United States to throw around its financial heft to reshape the world.
The Republican President is making a major political bet that his actions will not worsen inflation, cause financial aftershocks that could destabilise the worldwide economy or provoke a voter backlash.
It is possible that the tariffs could be short-lived if Canada and Mexico can reach a deal with Mr Trump to more aggressively address illegal immigration and fentanyl smuggling. Mr Trump’s move against China is also tied to fentanyl and comes on top of existing import taxes.
The President is preparing more import taxes in a sign that tariffs will be an ongoing part of his second term.
Mr Trump’s intentions drew a swift response from financial markets, with the S&P 500 stock index slumping after his announcement on Friday.
Tariffs tend to raise prices for consumers and businesses by making it more expensive to bring in foreign goods.
But inflation expectations are creeping upward in the University of Michigan’s index of consumer sentiment as respondents expect prices to rise by 3.3%. That would be higher than the actual 2.9% annual inflation rate in December’s consumer price index.
He claims, despite economic evidence to the contrary, that the US was at its wealthiest in the 1890s under President William McKinley.
Mr Trump, who has aspired to remake America by using McKinley’s model, is conducting a real-time experiment to see whether the economists who warn tariffs lead to higher prices are wrong.
Mr Trump has fondly called Mr McKinley, an Ohioan elected president in 1896 and 1900, the “tariff sheriff”.
Mr Setser noted that the tariffs on China without exemptions could raise the price of iPhones, which would test just how much power corporate America has with Trump. Apple’s chief executive Tim Cook attended Mr Trump’s inauguration last month.
But Wending Zhang, a Cornell University economist who worked on the research, said the fallout would be felt more in Canada and Mexico because of their reliance on the US market.
Mr Trudeau said Canada is addressing Trump’s calls on border security by implementing a 1.3 billion Canadian dollar (£722 million) border plan that includes helicopters, new canine teams and imaging tools.
A person collects the receipt following fuel payment at the pay-at-the-pump station in Edmonton, AB, Canada. US President Donald Trump announced today that he would proceed with his plan to impose a 25% tariff on imports from Canada, a decision that could significantly disrupt Canada’s economy, given the close economic ties between the two nations, with daily exports to the U.S. totaling $1.9 billion in goods and services. (Photo: Artur Widak/NurPhoto via Getty Images)While she has emphasised the ongoing dialogue since Mr Trump first floated the tariffs in November, she has said that Mexico is ready to respond.
Mr Trump still has to get a budget, tax cuts and increase to the government’s legal borrowing authority through US congress. The outcome of his tariff plans could strengthen his hand or weaken it.
“If this weekend’s tariffs go into effect, they’ll do catastrophic damage to our relationships with our allies and raise costs for working families by hundreds of dollars a year,” said Democratic senator Chris Coons.
“Congress needs to stop this from happening again.”
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