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Trump relaunches the tariff war: blow to Mexico, Canada and China

Donald Trump promises 25% tariffs on Mexico and Canada and 10% on China to fight immigration and drug trafficking. Markets on alert, North American economies at risk

Trump relaunches the tariff war: blow to Mexico, Canada and China

The elected president Donald Trump shakes up the international economic landscape once again by announcing on Truth, his social network, his intention to impose 25% tariffs on all products imported from Mexico and Canada, it's a additional 10% on those coming from China. The move, promised as one of the first executive orders of his upcoming term, aims to combat illegal immigration and drug trafficking, especially fentanyl. “On January 20th, I will sign all the paperwork necessary to impose these tariffs until this invasion of drugs and illegal immigrants is stopped,” Trump said.

Mexico and Canada in the crosshairs for immigration

The president-elect accuses the two neighboring countries of not doing enough to counter illegal migration flows and the drug trafficking. Trump called the northern and southern borders of the United States “ridiculous” and reiterated that “Mexico and Canada have the absolute power to easily solve this problem”: “As everyone knows,” says the Tycoon, “thousands of people are crossing into Mexico and Canada, bringing crime and drugs to levels never seen before. At this moment a caravan from Mexico, composed of thousands of people, seems unstoppable in its attempt to cross our currently open border.

Le tariffs of 25% would remain in place until an effective resolution: “This tariff,” Trump explained, “will remain in place until drugs, especially Fentanyl, and all illegal immigrants stop this invasion of our country! Both Mexico and Canada have the absolute right and power to easily solve this long-simmering problem. We hereby demand that they use that power, and until they do, it is time for them to pay a very heavy price!”

The announcement of the new president immediately raised alarm, as it represents a potential violation of the Usmca, the North American Free Trade Agreement signed by Trump himself in 2020. According to William Reinsch, former chairman of the National Foreign Trade Council, Trump's threats could be an attempt to force a renegotiation of the agreement by 2026, the date set for its review.

China and Fentanyl

Also the China was targeted (again), with the promise of additional 10% tariffs on all its products until It won't stop fentanyl trafficking to the United States. Trump recalled previous talks with Beijing, in which Chinese officials had promised severe penalties for traffickers, but to no avail. “I have had many talks with China,” the Tycoon wrote, “about the massive amounts of drugs, particularly Fentanyl, being shipped to the United States, but to no avail. China’s officials told me they would set their maximum penalty, death, for any trafficker caught doing this, but, unfortunately, they never followed through and drugs are flowing into our country, mostly through Mexico, at levels never seen before. Until they stop, We will charge China an additional 10% tariff, in addition to any additional fees, on all its numerous products entering the United States of America".

Trump placed particular emphasis on fentanyl trafficking, an opioid responsible for thousands of overdoses in the United States. Despite Beijing's commitments in 2023 to limit the export of the components needed for its production, the drug flow has not stoppedThe former president then accuses Mexico and China of not having respected their promises and believes that only drastic measures such as tariffs can put pressure on the governments involved.

The Chinese response was not long in coming. Liu Pengyu, a spokesperson for the Chinese embassy in Washington, said that “no one will win a trade or tariff war” and that economic cooperation between the two countries is “mutually beneficial.”

The consequences of the new duties

The announced rates would have devastating effects on Mexico and Canada, whose markets are heavily dependent on exports to the United States. Over 83% of Mexican exports and 75% of Canadian exports are directed to the United States. Immediately the reaction of currency markets: The Mexican peso lost 2%, hitting a one-year low, while the Canadian dollar fell to its lowest level since 2020.

The American economy, however, could also suffer. Price increases on imported goods, from food to automobiles, could fuel inflation, while sectors integrated for decades with Mexico and Canada could risk paralysis. Flavio Volpe, president of the Canadian Automotive Parts Manufacturers' Association, stressed the interdependence between the markets: “We are more than partners, we are almost a family.”

From Mexico, the president of the lower house of the Mexican Parliament, Ricardo Monreal, warned that “the escalation of trade reprisals It will only hit people's wallets without solving the problems". Meanwhile, sources close to the Canadian government report a telephone conversation between Trump and Justin Trudeau, who would have tried to dissuade the president-elect from continuing down this path.

Once he is reinstated, it will be seen whether Trump will use these threats as negotiating leverage or actually proceed with the imposition of tariffs.

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