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Canada, Mexico slap retaliatory tariffs on US, China to sue after Trump starts 'dumbest trade war in history'

"We are not looking to escalate, but we will stand up for Canada," Justin Trudeau said.

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February 03, 2025, 03:45 PM

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Following crushing tariffs of 25 per cent imposed on their exports to the U.S. by President Donald Trump, neighbours Canada and Mexico have responded with retaliatory tariffs of their own on imports from the U.S.

World leaders and economists have raised concerns that the North American trade war could lead to a recession, but Trump appears undeterred, telling the public via a social media post that Americans could "feel some pain" as a result of his tariffs.

Response

Following the Trump tariffs, Canada's Prime Minister Justin Trudeau and Mexico's President Claudia Sheinbaum swiftly responded.

Trudeau announced 25 per cent tariffs on C$30 billion (S$27.8 billion) worth of U.S. goods, such as tobacco, household appliances and military gear.

"We are not looking to escalate, but we will stand up for Canada," Trudeau said.

At least one Canadian premier, Doug Ford of Ontario, announced that American liquor products would be stripped from store shelves, and urged Canadians to buy Canadian products instead.

"Every year, [the Liquor Control Board of Ontario (LCBO)] sells nearly $1 billion worth of American wine, beer, spirits and seltzers. Not anymore...There's never been a better time to choose an amazing Ontario-made or Canadian-made product," Ford said.

Sheinbaum said she has directed her economy minister to implement a "Plan B" that includes tariff and non-tariff measures in Mexico's interests.

Meanwhile, China said it would file a lawsuit with the World Trade Organization over the 10 per cent tariff Trump imposed on Chinese imports.

"The U.S.'s unilateral tariff hike severely violates WTO rules. Not only does it fail to resolve its own issues, but it also disrupts normal economic and trade cooperation between China and the U.S.," said a spokesperson from China's Ministry of Commerce.

Reason

Trump blamed illegal immigration and drug trafficking for his decision to impose tariffs on the U.S.' neighbours.

Using that as justification, Trump declared a national emergency that allowed him to impose tariffs, a repeated campaign promise of his in the 2024 election.

The president has broad powers to take such action under the International Emergency Economic Powers Act, although no president in history has used it to place tariffs on imported goods.

The tariffs were also pushed through despite the terms agreed between the U.S., Canada and Mexico in the U.S.-Canada-Mexico Agreement, negotiated by Trump in his first term, after he pledged to get rid of the North American Free Trade Act (NAFTA) negotiated by President Bill Clinton.

Despite Trump's invective, NPR reported that Canada plays at best a minimal role in fentanyl smuggling into the U.S.

In 2024, only 43 pounds (19.5 kg) of fentanyl were seized at the U.S.' northern border, while 21,100 pounds were seized at the southern border.

Sheinbaum has also hit back at Trump's claims, forcefully rejecting his allegation that the Mexican government has "alliances" with criminal organisations.

"If such an alliance exists anywhere, it’s with the gun manufacturers of the United States, which sell high-powered weapons to these criminal groups," she said in a statement.

Sheinbaum's government has seized over 20 million doses of fentanyl since taking office and escalated operations against drug gangs, including cooperation with U.S. law enforcement over cartel finances.

"If the U.S. government and its agencies wanted to do something about the grave abuse of fentanyl in their country, they could, for example, combat the sale of drugs in the streets of their own cities, which they don’t do," Sheinbaum said.

Recession

Trump's actions have sparked concerns that Canada and Mexico may be headed for recessions, if the tariffs are not lifted quickly.

The Guardian quoted economist Paul Ashworth, who noted that exports to the U.S. make up about 20 per cent of Canada and Mexico's GDP, which could lead to a recession for both later in 2025.

Nikkei Asia quoted economist Greg Daco, who said the tariffs could lower U.S. GDP growth by 1.5 points in 2025 and lead to "stagflation", an economic quagmire where prices rise despite a lack of economic growth.

Markets in Tokyo and Seoul fell nearly 3 per cent when they opened on Feb. 3, led by Japanese automakers.

The right-leaning Wall Street Journal published an opinion piece by its editorial board, calling the Trump tariffs the "dumbest trade war in history."

"Mr. Trump sometimes sounds as if the U.S. shouldn’t import anything at all, that America can be a perfectly closed economy making everything at home.

This is called autarky, and it isn’t the world we live in, or one that we should want to live in, as Mr. Trump may soon find out."

Trump appears undeterred, and has told the public that they could "maybe" expect "some pain" as a result of his tariffs.

He again repeated his offer for Canada to become the "51st state" of the U.S. as a way to avoid the tariffs.

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