Mexico, Canada to retaliate against sweeping US tariffs with their own

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Author: AFP,
Publish Date: Sun, 2 Feb 2025, 3:54pm

US President Donald Trump has announced tariffs on Canada, Mexico and China, citing threats from illegal immigration and drugs.
Canadian and Mexican exports face a 25% tariff, with energy resources from Canada at 10%.
The tariffs could disrupt supply chains and raise import costs, potentially impacting consumer spending and inflation.

Canada will hit back at tariffs imposed by US President Donald Trump with 25% levies of its own on select American goods, Canadian Prime Minister Justin Trudeau said on Saturday.

“Canada will be responding to the US trade action with 25% tariffs against C$155 billion [US$106 billion] worth of American goods,” he said in a dramatic tone as he warned of a fracture in long-standing Canada-US ties.

The first round of tariffs would target C$30b worth of US goods on Tuesday, followed by further tariffs on C$125b worth of products in three weeks.

It comes as Mexico said they would retaliate against tariffs imposed by Trump with tariffs and other measures of its own.

Mexican President Claudia Sheinbaum said she had told her economy minister “to implement [the] ‘Plan B’ that we have been working on, which includes tariff and non-tariff measures in defence of Mexico’s interests”.

She also hit back at Washington’s accusation her government has an “intolerable alliance” with drug-trafficking groups.

“We categorically reject the slander made by the White House against the Mexican government about alliances with criminal organisations,” Sheinbaum wrote on social media platform X.

“If there is such an alliance anywhere, it is in the US gun shops that sell high-powered weapons to these criminal groups,” she added.

“If the United States government and its agencies wanted to address the serious consumption of fentanyl in their country, they can combat the sale of narcotics on the streets of their main cities, which they don’t do, and the money-laundering generated by this illegal activity that has done so much harm to their population,” Sheinbaum added.

Trump announced broad tariffs on Saturday on major US trading partners Canada, Mexico and China, invoking emergency economic powers to do so while citing a “major threat” from illegal immigration and drugs.

Canadian and Mexican exports to the United States will face a 25% tariff, although energy resources from Canada will have a lower 10% levy, with duties starting as soon as Tuesday.

Goods from China, which already face various rates of duties, will see an additional 10% tariff, said Trump.

He invoked the International Emergency Economic Powers Act in imposing the tariffs, with the White House saying “the extraordinary threat posed by illegal aliens and drugs, including deadly fentanyl, constitutes a national emergency”.

The aim is to hold all three countries “accountable to their promises of halting illegal immigration and stopping poisonous fentanyl and other drugs from flowing into our country”, the White House added.

Washington additionally accused Mexico’s government of having an “intolerable alliance” with drug-trafficking groups.

Donald Trump announced tariffs on Canada, Mexico and China, citing threats from illegal immigration and drugs. Photo / Getty Images

The announcement threatens upheaval across supply chains, from energy to automobiles to food.

Trump has repeatedly expressed his love for tariffs, and has signalled Saturday’s action could be the first volley in further trade conflicts to come.

This week, he pledged to impose duties on the European Union in the future.

He has also promised tariffs on semiconductors, steel and aluminium, as well as oil and gas.

“Tariffs are a powerful, proven source of leverage for protecting the national interest,” the White House said.

Trump, in Florida for the weekend, wrote on social media: “We need to protect Americans, and it is my duty as president to ensure the safety of all.”

Trump’s move an ‘opening salvo on the tariff front’

“The tariff action announced today makes clear that our friends, neighbours and Free Trade Agreement partners are in the line of fire,” said Wendy Cutler, vice-president at the Asia Society Policy Institute and a former US trade negotiator.

“The move today is an opening salvo on the tariff front,” she told AFP.

She noted Canada and Mexico will face domestic pressure to retaliate.

Economic integration between the United States, Mexico and Canada – who share a trade pact – means stiff tariffs will have “a strong and immediate impact” in all three countries, she said.

Imposing sweeping tariffs on the three biggest US trading partners in goods carries risks for Trump, who won November’s election partly because of public dissatisfaction over the economy.

Higher import costs would likely “dampen consumer spending and business investment”, said EY chief economist Gregory Daco.

He expects inflation would rise by 0.7 percentage points in the first quarter this year with the tariffs, before gradually easing.

“Rising trade policy uncertainty will heighten financial market volatility and strain the private sector, despite the administration’s pro-business rhetoric,” he said.

Economists also expect growth to take a hit.

Trump’s supporters have downplayed fears tariffs would fuel inflation, with some suggesting his planned tax cuts and deregulation measures could boost growth instead.

Canada ready to respond to tariffs – Trudeau

Trudeau said on Friday Ottawa is ready with “a purposeful, forceful” response.

Doug Ford, premier of Canada’s economic engine Ontario, warned of potential job losses and a slowdown in business with tariffs.

He told CNN on Saturday: “We’re going to stand up for what’s right.”

Sheinbaum said after the announcement she was calm as she knows “the Mexican economy is very powerful”.

Sheinbaum has met Mexican business representatives, with her economy minister Marcelo Ebrard saying on Saturday the private sector was closing ranks around her in the face of potential commercial “arbitrariness”.

US Senate minority leader Chuck Schumer has warned new tariffs could “further drive up costs for American consumers”.

Canada and Mexico are major suppliers of US agricultural products.

The tariffs are also expected to hit the auto industry hard, with automakers and suppliers producing components throughout the region.

Analysts have warned hiking import taxes on crude oil from countries like Canada and Mexico threaten US energy prices too.

Nearly 60% of US crude oil imports are from Canada, a Congressional Research Service report noted.

– Agence France-Presse

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