Trump Plans Tariffs on Canada, Mexico, China: What does it mean?

Experts believe that the new tariffs can have serious implications not only for the US but also for global supply chains and companies that do business with some of the world’s largest economies.

US President-elect Donald Trump has pledged to impose tariffs on the United States’ three largest trading partners — Canada, Mexico, and China — as soon as he takes office on January 20. In 2023, these countries collectively purchased more than $1 trillion of US exports and provided nearly $1.5 trillion in goods and services to the US, according to The New York Times.

How High Can Trump’s Tariffs Get?

Trump announced that he would sign an executive order imposing a 25% tariff on all Mexican and Canadian imports and an additional 10% tariff on Chinese goods on the first day of his administration. However, it remains unclear if these proposed tariffs would be in addition to tariffs discussed during his campaign. Trump had previously mentioned imposing tariffs of 60% or more on Chinese imports and suggested he might enforce a 1,000% tariff on vehicles imported from Mexico.

Why Does Trump Want to Impose These Tariffs?

In his posts on Truth Social on Monday (November 25), Trump stated that the tariffs would remain in place for Mexican and Canadian goods until the “invasion” of drugs and undocumented migrants ceases. He specifically mentioned fentanyl and illegal immigration as key issues.

Trump also accused China of failing to act against drug trafficking into the US, despite previous assurances from Chinese representatives. According to some Trump allies, the president-elect aims to use the threat of tariffs as leverage in future negotiations with foreign countries, Al Jazeera reported.

What Could Be the Implications?

In the short term, the tariffs would increase the cost for companies in Canada, Mexico, and China to export goods to the US. Experts suggest that these companies would pass on the extra costs to customers, resulting in higher prices.

Mexico’s auto industry could be particularly affected, as it hosts manufacturing plants for major car brands like Honda, Nissan, Toyota, Mazda, and Kia, as well as several Chinese auto parts suppliers. Tech companies such as Foxconn, Nvidia, and Lenovo, which have server facilities and factories in Mexico, would also be hit.

Canadian media reported that even a 10% tariff could result in $21 billion (Canadian $30 billion) a year in economic costs.

In the long term, American industries that ship parts, materials, and finished goods across US borders could also be impacted. Industries dependent on the tightly integrated North American market, which has been knit together by a free-trade agreement for over three decades, could face high costs. This situation could also prompt retaliation from other governments, potentially leading to new levies on American exports.