President Donald Trump’s long-threatened tariffs on Canada and Mexico went into effect Tuesday, heightening trade tensions and prompting immediate retaliation.
The new tariffs impose a 25% tax on imports from both countries, with Canadian energy products facing an additional 10% duty.
The move follows an escalation in the US-China trade war, as tariffs on Chinese goods—first imposed in February—were doubled from 10% to 20%.
Beijing quickly responded with countermeasures, including tariffs of up to 15% on US agricultural exports and expanded restrictions on American businesses.
China announced it had filed additional complaints with the World Trade Organization, arguing that the new tariffs violate international trade laws.
“China has raised WTO complaints against the United States’ newly imposed tariff measures,” its mission to the WTO stated on Tuesday.
Canada and Mexico vow reciprocal tariffs
Canadian Prime Minister Justin Trudeau swiftly condemned the tariffs and announced that Canada would impose reciprocal duties on more than $100 billion worth of US goods.
“There is no justification for these tariffs,” Trudeau stated.
Canadian Prime Minister Justin Trudeau announced a 25% tariff on C$30 billion worth of US imports, effective immediately, with tariffs on an additional C$125 billion set to take effect in 21 days.
Trudeau criticized President Donald Trump for appeasing Russian President Vladimir Putin while initiating a trade war against the US’s closest ally.
Mexico’s President Claudia Sheinbaum echoed similar sentiments, promising countermeasures.
“We don’t want to enter into a trade war,” she said, emphasizing that economic conflicts harm ordinary citizens.
However, Mexico plans to impose tariffs on key US exports, with a detailed list to be announced at a public event in Mexico City this Sunday.
“We have been clear: cooperation and coordination, yes; subordination and interventionism, no. Mexico deserves respect,” Sheinbaum added.
Economic uncertainty sends US markets down
The tariffs have sparked fears of rising inflation and economic instability.
Despite warnings from economists, President Trump defended the import taxes, describing them as “a very powerful weapon” for securing American prosperity.
“Politicians haven’t used them because they were either dishonest, stupid, or paid off,” Trump said at a White House press conference on Monday.
US financial markets reacted negatively to the tariffs, with stocks dropping sharply as investors worried about economic fallout.
The Dow Jones Industrial Average fell by about 1.6%, while the benchmark S&P 500 dropped 1.6%.
The Nasdaq Composite also shed around 1.5%, as all three indexes took another big leg lower.
Notably, the Nasdaq is set to close down at least 10% from its record closing high on Dec. 16, which would mark correction territory for the tech-heavy index.
The tariffs are estimated to increase costs by $1.4 trillion to $1.5 trillion over the next decade, disproportionately affecting lower-income households, according to the Yale University Budget Lab.
The road ahead: Further tariffs possible
Initially scheduled to take effect in February, the tariffs were postponed for negotiations, but the failure to reach a resolution led to their implementation.
While the Trump administration claims the tariffs are meant to address issues like drug trafficking and illegal immigration, critics argue they are more about trade imbalances.
Trump has indicated that he may impose additional tariffs on the European Union, India, and industries such as computer chips, autos, and pharmaceuticals.
The unpredictability of Trump’s trade policies has left markets in flux.
“It’s chaotic, especially compared to the way tariffs were rolled out in the first Trump administration,” said Michael House, co-chair of the international trade practice at Perkins Coie law firm. “It’s unpredictable. We don’t know, in fact, what the president will do.”
Democratic lawmakers have sharply criticized the tariffs, while some Republican senators have also voiced concerns over the economic risks associated with escalating trade conflicts.
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