Trade wars deepen as China and Canada retaliate after Trump's tariffs come into effect

U.S. President Donald Trump's new 25% tariffs on imports from Mexico and Canada took effect on Tuesday, along with a doubling of tariffs on Chinese goods to 20%, signaling the start of a trade war with the U.S.'s three largest trading partners. These new tariffs, enacted after Trump claimed these countries failed to adequately curb fentanyl flows into the U.S., are expected to cut into approximately $2.2 trillion in bilateral trade with the United States, potentially impacting various sectors.

China responded immediately by announcing tariffs of 10-15% on some U.S. imports, effective March 10th. Beijing also imposed export and investment restrictions on 25 U.S. companies, citing national security concerns. However, similar to its retaliation against the Trump administration's February 4th tariffs, China did not include any household names on the list this time, aiming for a more targeted approach. China specified that 10 of the 25 companies were penalized for selling weapons to Taiwan, which China claims as its territory, further escalating tensions.

The new U.S. tariffs are in addition to existing levies on thousands of Chinese goods. Former President Joe Biden had already increased tariffs on some of these products last year, including doubling tariffs on Chinese semiconductors to 50% and quadrupling tariffs on Chinese electric vehicles to over 100%. The new 20% tariff will apply to several U.S. consumer electronics imported from China, including smartphones, laptops, video game consoles, smartwatches, speakers, and Bluetooth devices, potentially raising costs for American consumers.

Canadian Prime Minister Justin Trudeau stated that if Trump's tariffs remain in effect after 21 days, Ottawa will immediately impose 25% tariffs on $20.7 billion worth of U.S. imports and tariffs on another $86.2 billion worth of goods. He previously indicated that Canada would target U.S. beer, wine, bourbon whiskey, home appliances, and Florida orange juice. Trudeau stated in a release, "Our tariffs will remain in place until the U.S. rescinds its trade actions, and we are actively engaged in discussions with provinces and territories to pursue a number of non-tariff measures if the U.S. tariffs do not stop."

Trudeau added that the U.S. tariffs violate the United States-Mexico-Canada Agreement, which Trump signed during his first term, noting that the action will disrupt the extremely successful trade relationship between the two countries. Canadian Chamber of Commerce CEO Candice Bergen stated in a release, "The U.S. government’s reckless decision today is forcing Canada and the United States towards recession, job losses, and economic disaster." She added that the U.S. tariffs will increase costs for consumers and producers and disrupt supply chains, noting that "tariffs are a tax on the American people," and will harm the overall economy.

Since taking office in January, Trump has moved quickly on his tariff plans. The new administration fully reinstated the 25% tariffs on steel and aluminum imports, which took effect on March 12th, eliminating previous exemptions. Last Saturday, Trump initiated a national security investigation into imports of lumber and wood products, which could lead to high tariffs. Canada already faces a 14.5% U.S. tariff on softwood lumber, and new tariffs on these goods would present additional challenges for the Canadian economy.

A week ago, Trump also reinstated an investigation targeting countries that levy digital services taxes. He has also proposed charging up to $1.5 million per vessel manufactured in China that enters a U.S. port and initiated a tariff investigation into copper imports. Beyond these measures, he also plans to raise reciprocal tariffs to match other countries' levies and offset their other trade barriers, a move that would hit the European Union the hardest, potentially sparking further global trade disputes.