CNN
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President-elect Donald Trump on Monday promised to significantly increase tariffs on products from Mexico, Canada and China starting on his first day in office, a policy that could significantly increase costs for U.S. businesses and consumers. .
President Trump said the move would be in retaliation for illegal immigrants and “crime and drugs” flowing across the border.
“On January 20th, in one of my first of many executive orders, I will impose a 25% tariff on Mexico and Canada on all products imported into the United States and their ridiculous opening of borders. I will sign all necessary documents,” Trump posted on his Truth page. social platform. “These tariffs will remain in effect until we stop drugs, especially fentanyl, and all illegal aliens from invading our country!”
President Trump said America’s neighbors “can easily solve this long-simmering problem.”
Similarly, President Trump said that until China stops the flow of illegal drugs into the United States, China will face additional tariffs of 10% above current tariffs on its products.
President Trump posted on Truth Social that he had “multiple discussions with China about the large amounts of drugs, especially fentanyl, being sent to the United States, to no avail.”
In his post, the president-elect claimed that Chinese authorities promised to execute drug dealers caught smuggling drugs into the United States, but “never did.”
In response to President Trump’s announcement, Chinese Embassy Spokesperson Liu Pengyu said that the country is in contact with the United States on counternarcotics operations and that “the idea that China would knowingly allow fentanyl precursors to flow into the United States is “It is completely contrary to facts and reality.”
“On the issue of US tariffs on China, China believes that China-US economic and trade cooperation is mutually beneficial in nature. There are no winners in trade wars or tariff wars,” Liu said in a statement to CNN. mentioned in.
Mexico’s President Claudia Sheinbaum responded Tuesday, warning the president-elect that “neither threats nor tariffs will solve the problems of immigration and drug consumption.”
“Imposing one tariff means retaliating with another, and this will continue until we endanger our shared businesses,” he said in a letter to Trump.
Canadian officials responded to the announcement in a statement posted to Ta.
“We will, of course, continue to discuss these issues with the incoming government,” Canada’s Deputy Prime Minister Chrystia Freeland and Public Safety Minister Dominic LeBlanc said in a statement.
Canadian Prime Minister Justin Trudeau called President Trump shortly after his social media post, according to a source in his office. A senior Canadian government official told CNN that the brief call focused on border security and trade. They called the meeting productive and said Prime Minister Trudeau and President Trump promised to stay in touch.
“We know this relationship requires some work, and we intend to do that,” Trudeau confirmed in a phone call in Ottawa before arriving for the cabinet meeting.
“We obviously talked about getting the facts straight and how the strong and effective ties between our two countries go back and forth,” Trudeau said. “We talked about some issues that we could work on together, and it was a good decision. What we can do is get the facts out in a constructive way and move forward.”
These punitive tariffs could wreak havoc on U.S. supply chains and industries that rely on goods from America’s closest trading partners.
Carl Sciamotta said, “Tonight’s proposed measures would hit many of America’s strategic industrial sectors hard, increase the tax burden by about $272 billion a year, raise commodity prices, raise interest rates, and “This could debilitate the vulnerable household sector.” , Chief Market Strategist at Corpay Cross-Border Solutions.
Immediately after the announcement, the Canadian dollar fell 1.2% against the US dollar and the Mexican peso fell 2% against the dollar, but both currencies had regained some of their losses by Tuesday morning. Although the Chinese yuan is controlled by the government, it was trading at a high level of more than 7.6% in offshore markets.
U.S. financial markets were also hurt, although investors believed the tariffs would eventually strengthen the dollar. The unprecedented tariffs will significantly increase the cost of everyday goods for Americans that were previously imported across the border without import taxes.
This surprising shift could hinder economic growth, especially if inflation-weary consumers cut back on spending in the face of higher costs.
On Tuesday, the Dow Jones Industrial Average fell 50 points, or 0.1%. The broader S&P 500 and Nasdaq rose slightly.
According to the U.S. Energy Information Administration, the U.S.’s largest import from Canada is oil, which hit a record high of 4.3 million barrels per day in July. The United States also imports automobiles, machinery, various other goods, plastics and lumber from Canada, according to the United Nations trade mission.
The United States imports most of its cars and auto parts from Mexico, which will overtake China as the country’s largest exporter to the United States in 2023, according to trade statistics released by the Commerce Department earlier this year. Mexico is also a major supplier of electronics, machinery, oil, and optical equipment, and significant amounts of furniture and alcohol flow into the United States.
The United States imports machinery, toys, games, sporting goods, furniture, plastics, and a significant amount of electronic products from China.
CNN reports that during President Trump’s first term, he imposed tariffs on approximately $380 billion worth of items, including baseball caps, bags, bicycles, televisions, sneakers, and thousands of other products made in China. Ta. Trump’s tariffs also hit foreign steel, aluminum, washing machines and solar panels.
Under the trilateral USMCA trade agreement promoted by President Trump during his first administration, many U.S. imports from Canada and Mexico are exempt from tariffs. It is unclear how President Trump plans to implement the proposed tariffs without violating USMCA.
President Trump has regularly cited the passage of USMCA, which replaced NAFTA, as a political victory and a highlight of his presidency.
President Trump, as he did during his first administration, has used tariffs as a cudgel against foreign countries to grow domestic manufacturing while raising tax revenues to cover the large revenue gaps created by his proposed tax cuts. was making a point.
Tariffs effectively act as a tax on goods imported into the United States. President Trump has repeatedly said that targeted foreign countries pay the tariffs, but in reality, the tariffs are paid by the companies that buy the imports, and the costs are typically passed on to U.S. consumers. are. Many mainstream economists believe that tariffs will lead to inflation, and the Peterson Institute for International Economics estimates that President Trump’s proposed tariffs (prior to the new tariffs announced Monday night) would cost American households $2,600 a year. We estimate that the burden will be more than that.
Trump’s nominee for Treasury secretary, Scott Bessent, said tariffs, if implemented correctly, will not accelerate inflation. Wall Street welcomed Bessent’s appointment. He is widely expected to introduce tariffs in stages.
If confirmed by the Senate, Mr. Bessent would take on some of the responsibility for implementing tariffs in coordination with the Secretary of Commerce and the Office of the U.S. Trade Representative, but Mr. Trump, as president, has significant authority to impose tariffs with a single stroke of the pen. will be exercised. He did just that the last time he was in the White House, imposing hefty tariffs on products primarily from China.
The problem with tariffs is that they often provoke retaliatory action by targeted countries and spark trade wars, and that’s exactly what happened during President Trump’s first term. The impact of tariffs on domestic manufacturing has slowed as manufacturers’ products become less attractive to foreign buyers.
President Trump has promised to significantly expand tariffs during his second term. He continues to debate various numbers, but he calls for imposing tariffs of at least 60% on all Chinese goods and a flat tariff of 10% or 20% on all other imports into the United States. I am proposing.
This story has been updated with additional context and development.
CNN’s Matt Egan, Paula Newton, Jack Guy and Jack Forrest contributed to this report.
