China, Canada strike back at Trump's tariffs: Is Mexico next?

As U.S. President Trump imposed new tariff policies targeting his three major trade partners, China, Mexico, and Canada have successively announced retaliatory tariff measures, raising concerns about a potentially disastrous trade war. This development underscores the complexities of global trade and the far-reaching impact of Trump's tariffs on trade partners.

China has imposed tariffs of up to 15% on a variety of American agricultural products and has blacklisted more than 20 U.S. companies. This decisive action marks a significant escalation in the ongoing dispute between the world's two largest economies. These sanctions specifically target some of the most crucial U.S. exports to China, including soybeans, meat, and grains.

Trump is raising tariffs on Chinese goods by 10 percentage points, bringing the total tax rate on certain Chinese imports to 45%. He has also imposed a 25% tariff on products from Mexico and Canada, posing a severe challenge to the 31-year legacy of the North American Free Trade Agreement. These tariffs officially took effect at 12:01 a.m. ET on Tuesday, after Trump announced on Monday that he would not extend a month-long delay to his strategy.

Later on Tuesday, there were indications that the tariffs on Canada and Mexico might be reconsidered. Commerce Secretary Howard Lutnick stated that Trump "might" reduce tariffs on the two countries, which had just been announced 24 hours prior.

In a press conference, Canadian Prime Minister Justin Trudeau criticized "America's trade war," warning that "it's going to hurt all of us." He dismissed Trump's rationale for the tariffs, saying that "the fentanyl excuse he gave today for these tariffs is complete and utter hogwash." Trudeau emphasized that Canada would impose tariffs on approximately $107 billion worth of U.S. products, with about $21 billion taking effect immediately and the remainder in 21 days.

In response, Trump posted on social media that U.S. tariffs "will immediately increase at the same rate" in response to any reciprocal tariffs implemented by Canada. Mexican President Claudia Sheinbaum announced on Tuesday morning that her government was also prepared to implement retaliatory tariffs, with an announcement expected at a rally in Mexico City.

Sheinbaum denounced a "offensive, slanderous, and unfounded communiqué" issued by the White House regarding Mexico, which claimed that drug cartels "operate with impunity" due to an "unacceptable relationship" with the Mexican government. Given that approximately 80% of Mexico's exports are destined for the U.S., these tariffs could trigger a recession. The integration of Mexican manufacturing with U.S. factories means that tariffs on Mexican goods could have unintended consequences for U.S. companies, particularly in the automotive sector.

Sheinbaum stated that she and Trump had agreed to speak by phone, possibly on Thursday, to discuss the tariff issue. If the tariffs remain in effect, Mexico plans to announce countermeasures, including retaliatory tariffs, on Sunday. While Trump has said he does not believe Beijing will respond strongly, China's State Council quickly announced 15% tariffs on U.S. goods including chicken, wheat, and corn. In addition, a 10% tariff will be imposed on various U.S. products, such as soybeans, sorghum, and dairy products.

Foreign Ministry spokesman Lin Jian said on Tuesday that if Washington "insists on waging a tariff war, a trade war, or any kind of war, China will fight to the very end." China's Ministry of Commerce had previously described Trump's tariffs as a violation of international trade rules and a manifestation of U.S. "unilateralism and bullying." These Chinese tariffs are scheduled to take effect on March 10 and could affect billions of dollars in U.S. exports.

According to the U.S. Department of Agriculture, China, as the largest market for U.S. agricultural products, accounted for 17% of total U.S. agricultural exports in 2023. Last year, China imported nearly $20 billion of U.S. agricultural products, which will now be subject to the newly imposed tariffs, representing approximately 80% of U.S. agricultural exports to China.

As of late afternoon, wheat and corn futures were down about 2% and 1%, respectively. The announcement of the tariffs has caused significant turmoil in the U.S. markets for two consecutive days. The Dow Jones Industrial Average fell 670 points, a drop of more than 1.5%, closing at 42,520.99. The S&P 500 fell 1.2% to close at 5,778.15, while the tech-heavy Nasdaq Composite fell more than 0.3% to close at 18,285.16.

Earlier in February, Trump imposed 25% tariffs on Canadian and Mexican goods, claiming that they had not done enough to curb fentanyl and immigration across the U.S. border. Although Canada is a minuscule part of the sources of these flows, the president delayed the tariffs for a month as both countries worked to strengthen border security. Nevertheless, Trump proceeded with the tariffs on Tuesday.

Concurrently, he imposed a 10% tariff on Chinese imports, claiming that China had failed to control the flow of fentanyl into the United States. In retaliation, China imposed 15% tariffs on U.S. coal and liquefied natural gas, while imposing 10% tariffs on agricultural equipment and crude oil. In addition, China restricted exports of minerals used in high-tech manufacturing, launched an antitrust investigation into Google, and blacklisted two more U.S. companies.