The tariffs imposed by President Trump threatened economic upheavals for U.S. consumers and businesses on Tuesday as the country's biggest trading partner partner surged the fear of a burgeoning trade war.
Canada and China have quickly condemned US tariffs and announced retaliatory tariffs on US exports. Mexican President Claudia Sinbaum said on Sunday that if US tariffs are still in place, she would also announce measures.
“This is the time to fight back violently and demonstrate that there are no winners in the fight against Canada,” Canadian Prime Minister Justin Trudeau said on Tuesday with a strict, sometimes chewing address.
US tariffs were a severe shift from the evangelism of free trade that marked much of America's postwar foreign policy. The measure was a 25% tariff on all imports from Canada and Mexico, and a 10% tariff on all imports from China. They came on a variety of taxes, including 10% tariffs on Chinese goods that took effect a month ago, and what remains from the Chinese trade war during Trump's first term.
Amid the tariff disputes, the bounty and flattery employed by foreign leaders in the first weeks of the Trump administration appeared to have passed away.
Calling Trump “Donald,” Trudeau said at a press conference in Ottawa: But this is very stupid. ”
In a statement, the Canadian government said it would impose a 25% tariff on unspecified American products worth $30 billion, and it would extend the tariff to a $125 billion worth of good over 21 days.
China's Treasury Department has announced a 15% tariff on imports of chicken, wheat, corn and cotton from the United States, and a 10% tariff on imports of US Sondo, soybeans, pork, beef, aquatic products, fruits, vegetables and dairy products.
US tariffs and retaliation initially prompted a rapid sale in global financial markets. Stock markets in Asia, Europe and the US fell sharply. The automotive sector was hit hardest, but stocks in other sectors recovered in the afternoon. American companies, including Target and Best Buy, have warned of rising prices, while industry groups have predicted an increase in gasoline and energy costs in some parts of the country.
As volatility and uncertainty spread, Trump and Trudeau traded barbs.
The US President called the Canadian Prime Minister “Governor Trudeau” and reiterated his claim that Canada should be enveloped in the United States.
“Perhaps he wants to sink the Canadian economy and allow Canada to be annexed,” Trudeau responded. “It never happens. We will never become the 51st state.”
The prime minister contrasted the growing intimacy with Russian president Vladimir V. Putin, which Canadian leaders called “a lying and murderous dictator,” with Trump's tariffs imposed on Canada (the US “closest partner and ally”).
“What do you think of Americans abandoning American friends and allies?” Trudeau asked.
Trudeau's comments spoke to betrayal expressed by Canadian and Mexican officials. Mexico had been president for quite some time to convince the president that it was strengthening its enforcement at the border. Trump threatened tariffs after the November election, saying US neighbours in the north and south were not enough to stop the flow of drugs and undocumented immigration to the United States.
In Canada, anger towards the United States has provided a measure of unity despite deep political divisions.
“President Trump stabbed his best American friend in the back,” Canadian Conservative leader Pierre Polyeave told reporters. According to recent polls, Poilliable is Trudeau's rival and loves to become Canada's next leader.
The trade disputes and subsequent condemnations were filtered through the Canadian political system.
Ontario Premier Doug Ford said Tuesday that he ordered the removal of all US-made liquor from the provincial alcohol dealer to the removal of all US-made liquor and cancelled Elon Musk's contract with Starlink. He also threatened to charge 25% additional charges on electricity exported from Ontario to Michigan, Minnesota and New York.
The Nova Scotia alcohol distributor also says he will remove American products from store shelves.
Some U.S. officials said the tariffs were intended to promote the crackdown on illegal drugs, particularly fentanyl.
Vice President JD Vance said Tuesday that the administration should see “real involvement” as “Canadians weren't serious about stopping the drug trafficking.” (Trudeau said that less than 1% of fentanyl intercepted at the US border came from Canada, but they were still working to stop that flow.)
And in an interview with CNBC on Tuesday morning, U.S. Commerce Secretary Howard Lutnick said “of course, the president can remove these tariffs” if he can prove to the president that he can stop the flow of fentanyl.
But Trump provided a completely different economic argument for tariffs. In a social media post Tuesday, he said that while Canadian banks are “full of the American market,” U.S. banks have been prevented from running their business in Canada.
In another post, he argued that if a company sets up a store in the US, tariffs could be avoided. “If a company moves to the US, there will be no tariffs!!” he wrote.
In pushing protectionist measures, Trump seemed to imagine a much less interconnected world than what exists today. After decades of globalization of the supply chain, products and their components often repeatedly cross boundaries.
While the polls are inconclusive as to whether Americans support tariffs, the president's argument that it will help restore jobs lost in free trade hit a chord among many working-class voters.
One labor group defended tariffs on Tuesday. The United Automobile Workers Union welcomed them as a step in the right direction to help workers. In a statement, the union said the North American Free Trade Agreement and its successor, the US-Mexico-Canada Agreement, caused blue-collar jobs for decades as companies moved production to Mexico and other countries.
“Taxes are a powerful tool in the toolbox to cancel fraud in anti-worker trade transactions,” the union said. “I'm happy to see the US president take positive action to end the free trade disaster that fell like a working class bomb.”
The economist said tariffs are likely to reduce economic growth in both the US and in the countries that are subject to tariffs. Canada, Mexico and China have long been the largest trading partners in the United States.
Economists have explained many other ways that US consumers can be affected.
Analysts at Barclays Investment Bank said in a report Tuesday that tariffs “will effectively wipe out all profits” for General Motors, Ford and Stellantis.
Krishna Guha, vice-chairman of investment bank Evercore ISI, predicted that if tariffs are maintained, one measure of inflation could increase by about half a point by the final quarter of this year. The impact will continue until next year, he said.
In the northeast, the region could rise by mid-March, as it receives a significant portion of gasoline and diesel from Canadian refineries, according to Patrick de Haan, head of oil analysis at Gasbuddy, which tracks gas prices.
Midwest consumers, whose refineries rely heavily on Canadian oil, can expect a slight increase in gasoline and diesel prices of around 5-20 cents per gallon, DeHan said.
In New York and New England, the operators of the Electric Grid had requested clarification on Tuesday whether tariffs would apply to electricity imports from Canada. The two regions receive a large amount of electricity from hydroelectric dams in Ontario and Quebec. Tariffs could probably raise household electricity bills.
With the potential economic consequences of tariffs occurring on Tuesday, some of Trump's most vocal allies only provided qualified assistance.
Sen. Ted Cruz, a Republican of Texas, told reporters at Capitol Hill that he hoped the tariffs would not last for a long time.
“Texas has a huge amount of trade with both Mexico and Canada,” Cruz said. “So these tariffs serve as an incentive for President Trump to say they are designed to be.”
Reports include Matina Stevis-Gridneff, Ian Austen Paulina Villegas, Catie Edmondson, Rebecca Elliott, Neal E. Boudette, Vjosa Isai Jack Ewing, Brad Plumer, Annie Correal, Colby Smith, Robert Jimison, Rob Copanson, Ana Swanson, Alan Rapport, Christer.
