U.S. President Donald Trump announced that 25% tariffs on goods from Mexico and Canada will take effect, raising concerns of a trade war and negatively impacting financial markets. The Dow Jones dropped significantly, with major automakers like General Motors and Ford seeing declines. Trump asserted there would be no deal to prevent tariffs unless Mexico curbs fentanyl flows. Canadian officials are preparing to respond, while Mexico claims to have contingency plans. Trump also plans to increase tariffs on Chinese imports to 20% and initiate several new tariff investigations, which could elevate inflation and threaten the economy, according to experts.
Washington:
On Monday, U.S. President Donald Trump announced that a 25% tariff on goods from Mexico and Canada will be implemented starting Tuesday, heightening concerns of a potential trade war in North America and causing turbulence in financial markets.
Following Trump’s comments, U.S. stock markets experienced a sharp decline during late afternoon trading, while both the Mexican peso and Canadian dollar weakened.
“They’re going to have to have a tariff. What they need to do is establish their car plants, and other operations, in the United States, thereby avoiding tariffs,” Trump stated from the White House.
He indicated that there was “no room left” for a deal that might circumvent the tariffs by controlling fentanyl imports to the U.S.
Moreover, Trump announced that reciprocal tariffs would be enacted on April 2 against countries that impose duties on U.S. goods. He reiterated his commitment to increasing tariffs on all Chinese imports from 10% to 20% as a penalty for ongoing fentanyl shipments to the U.S.
Trump asserted that China “has not taken adequate steps to address the illegal drug crisis.”
CEOs and economists warn that Trump’s tariffs on Canada and Mexico, which account for more than $900 billion in annual U.S. imports, would significantly setback the integrated North American economy.
The tariffs are confirmed to take effect at 12:01 a.m. EST (0501 GMT) on Tuesday, placing 25% tariffs on Canadian and Mexican goods, with a 10% tariff on Canadian energy. Officials from Mexico did not immediately provide comments.
Canadian Foreign Minister Melanie Joly informed reporters that Ottawa is prepared to respond. “There’s an element of unpredictability and chaos emanating from the Oval Office, and we will manage it,” she stated.
The Dow Jones Industrial Average plummeted by 649.67 points, or 1.48%, the S&P 500 dropped by 104.78 points, or 1.76%, and the Nasdaq Composite declined by 497.09 points, or 2.64%.
Shares in automakers fell sharply, with General Motors—which has a substantial truck manufacturing operation in Mexico—down by 4%, and Ford down by 1.7%.
Gustavo Flores-Macias, a public policy professor at Cornell University, warned that consumers might experience price increases within days.
“The automobile industry is expected to suffer significant negative impacts, not only due to disruptions in the supply chains that connect the three countries in the manufacturing process, but also due to anticipated vehicle price increases, which could suppress demand,” Flores-Macias remarked.
PLANS FOR MEXICO’S RESPONSE
Mexico, after avoiding the initial series of Trump’s tariffs by agreeing to a last-minute deal to deploy thousands of troops to its northern border, has intensified anti-drug measures and hinted at new actions concerning Chinese imports.
President Claudia Sheinbaum, in a press conference before Trump made his announcement, expressed that her administration was calm while awaiting Trump’s decisions but emphasized that Mexico would retaliate if tariffs were enforced.
“We have plans B, C, and D,” Sheinbaum remarked, without disclosing specifics. She noted that coordination with the U.S. regarding trade and fentanyl trafficking has been “very good.”
According to the Centers for Disease Control and Prevention, 72,776 individuals succumbed to synthetic opioids in the U.S. in 2023, primarily due to fentanyl.
Representative Suzan DelBene, a Democrat from Washington state, stated that the tariffs on Canada and Mexico would result in higher costs for American families at grocery stores, gas stations, and pharmacies.
“No president should have the authority to raise taxes without a Congressional vote,” she declared in a statement.
However, White House trade advisor Peter Navarro told CNBC on Monday that any inflation caused by tariffs would be “second-order small,” asserting that the president remains resolute, as he believes this path is vital for building a strong and prosperous America with rising real wages and more factory jobs.
On Saturday, Trump announced yet another trade initiative, launching a national security investigation into lumber and wood product imports that may lead to substantial tariffs. Canada, already facing a 14.5% U.S. tariff on softwood lumber, would be especially affected.
Additionally, last week, Trump recommenced a tariff investigation targeting nations that impose digital services taxes, proposed fees of up to $1.5 million for each Chinese-built ship entering a U.S. port, and initiated a new tariff inquiry regarding copper imports.
These actions complement his intentions to establish higher U.S. “reciprocal tariffs” that align with other countries’ tariff rates and counterbalance their trade barriers, a measure that could significantly impact the European Union due to value-added taxes charged by EU nations.
Nevertheless, Trump’s aggressive tariff policies might maintain elevated inflation levels and could potentially push the global economy toward recession, as warned by Desmond Lachman, a senior fellow at the conservative American Enterprise Institute.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)